This paper considers the valuation of a spread call when asset prices are log-normal. The implicit strategy of the Kirk formula is to exercise if the price of the long asset exceeds a given power function of the price of the short asset. We derive a formula for the spread call value, conditional...

Off the coast of Norway is a huge, undeveloped petroleum reservoir. The exploitation of this resource is a challenge to the oil industry both because of its specific reservoir geology and its deep water location. One of the decisions that must be made regarding this field is the choice of the...

A number of problems arise when dynamic programming is applied to investment problems. Attempts have been made to circumvent these problems by using continuous time models where the state process is generated by a stochastic differential equation. In this article, the authors assume that the...