I am having similar problems with the R2009 versions implementing dynamic programming algorithms for this type of problem, including with the CompEcon Toolbox that used to run.
The following might be the source of one or more problems:
--interaction with Optimization Toolbox or Robust Control commands
--RecursionLimit issues (see Solution ID: 1-18UZA)
--Value function iteration produces infinite or -inf results at one iteration
--incompletely designed and limited equations (very easy to do!)
--no theoretical closure required; hence any algorithm blows up
I discuss some of the theoretical and practical basis for valuation (including real options) using dynamic programming in my 2004 book Business Economics & Finance (CRC Press), which includes some Matlab code. You might want to look there, although it will not be enough to solve your programming issue. There also is a mention of the technique in the April 2009 issue of Business Economics in the article "value of private businesses in the US".
I will re-post if I discover a more robust method.
PLA
The following might be the source of one or more problems:
--interaction with Optimization Toolbox or Robust Control commands
--RecursionLimit issues (see Solution ID: 1-18UZA)
--Value function iteration produces infinite or -inf results at one iteration
--incompletely designed and limited equations (very easy to do!)
--no theoretical closure required; hence any algorithm blows up
I discuss some of the theoretical and practical basis for valuation (including real options) using dynamic programming in my 2004 book Business Economics & Finance (CRC Press), which includes some Matlab code. You might want to look there, although it will not be enough to solve your programming issue. There also is a mention of the technique in the April 2009 issue of Business Economics in the article "value of private businesses in the US".
I will re-post if I discover a more robust method.
PLA