Peter Forsyth, Ken Vetzal, and R. Zvan have a paper on using the penalty method for American options with stochastic volatility ("Penalty Methods for American Options with Stochastic Volatility"). If I recall he uses Heston.

<r>You could try reading a book about stochastic control as several of them would give examples of application to portfolio choice and optimal consumption. A couple you might check out:<AMAZON id="3642100449" url="http://www.amazon.com/Continuous-time-Stochastic-Optimization-Applications-Probability...

Please disregard request.

<t>I am looking for a copy of "Stochastic Calculus of Variations and Hypoelliptic Operators" by Paul Malliavin. I believe that it was published in the Proceedings of the International Conference on Stochastic Differential Equations. I have not been able to find this anywhere. Would anyone know where...

<t>Modigliani and Miller derived this formula to show how the capital structure of a firm could affect the value of the firm (i.e. to show the relationship between the value of the levered firm and the value of the unlevered firm). So in that sense it is useful for answering questions about how the ...

<t>It looks quite a bit like MM II with taxes. If 4% was the equity risk premium on the unlevered firm then rf + 4% would be the cost of equity for the unlevered firm. However, MM II uses D/E and your example contains the term D/(E + D*(tc)) so I'm not sure about that part off the top of my head. If...

<t>I'm not sure about a book or paper on the history, but have you read the paper "Portfolio Selection in Stochastic Environments"? The abstract is:In this article, I explicitly solve dynamic portfolio choice problems, up to the solutionof an ordinary differential equation (ODE), when the asset retu...

I have a copy if you still need it. Gary

Not sure if you still need the paper, but I have a copy if you're interested.Gary