Valuation of investments in real assets

A general model for the valuation of an investment producing a single commodity is formulated and analysed within a stochastic control theoretic framework. Using dynamic programming, the value of such an investment with a general payoff function is determined under the assumption that the commodity price process is given by a stochastic differential equation. The analysis results in closed form analytic solutions which can easily be computed, and exhibits qualitatively different optimal behaviours, depending on parameter values