Toward a new modeling of international economics: An attempt to reformulate an international trade model based on real option theory

Reformulation of economics by physics has been carried out intensively to reveal many features of the asset market, which were missed in the classical economic theories. The present paper attempts to shed new light on this field. That is, this paper aims at reformulating the international trade model by making use of the real option theory. Based on such a stochastic dynamic model, we examine how the fluctuation of the foreign exchange rate makes effect on the welfare of the exporting country.