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Mathematical Model for Investment in Gold Market: a Real Option Approach

Wareewan Wisedsing, Walailuck Chavanasporn


In this article, we apply multi-stage real option theory to find the optimal time to invest in gold market and also the optimal time to leave the market. In particular, we discuss the case where the dynamic of the gold market follows a geometric mean reverting process. We derive the Bellman equation and solve the problem backwards in time. The resulting free boundary problem is solved numerically via the shooting method.


investment, real options, dynamic programming.

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