Stochastic models for chemical reactions

Size: px
Start display at page:

Download "Stochastic models for chemical reactions"

Transcription

1 First Prev Next Go To Go Back Full Screen Close Quit 1 Stochastic models for chemical reactions Reaction networks Classical scaling and the law of mass action Multiple scales Example: Michaelis-Menten equation Example: Model of a viral infection References Abstract Collaboration with David Anderson, Karen Ball, George Craciun, Hye- Won Kang, Lea Popovic, Greg Rempala

2 First Prev Next Go To Go Back Full Screen Close Quit 2 Bilingual dictionary Chemistry propensity master equation nonlinear diffusion approximation Langevin approximation Van Kampen approximation quasi steady state/partial equilibrium Probability intensity forward equation diffusion approximation central limit theorem averaging

3 First Prev Next Go To Go Back Full Screen Close Quit 3 Reaction networks Standard notation for chemical reactions A + B κ C is interpreted as a molecule of A combines with a molecule of B to give a molecule of C. A + B C means that the reaction can go in either direction, that is, a molecule of C can dissociate into a molecule of A and a molecule of B. We consider a network of reactions involving m chemical species, A 1,..., A m. m m ν ik A i i=1 i=1 ν ika i where the ν ik and ν ik are nonnegative integers.

4 First Prev Next Go To Go Back Full Screen Close Quit 4 Markov chain models X(t) number of molecules of each species in the system at time t. ν k number of molecules of each chemical species consumed in the kth reaction. ν k number of molecules of each species created by the kth reaction. λ k (x) rate at which the kth reaction occurs. (The propensity/intensity.) If the kth reaction occurs at time t, the new state becomes X(t) = X(t ) + ν k ν k. The number of times that the kth reaction occurs by time t is given by the counting process satisfying R k (t) = Y k ( λ k (X(s))ds), where the Y k are independent unit Poisson processes.

5 First Prev Next Go To Go Back Full Screen Close Quit 5 Equations for the system state The state of the system satisfies X(t) = X() + k = X() + k R k (t)(ν k ν k ) Y k ( λ k (X(s))ds)(ν k ν k ) = (ν ν)r(t) ν is the matrix with columns given by the ν k. ν is the matrix with columns given by the ν k. R(t) is the vector with components R k (t).

6 First Prev Next Go To Go Back Full Screen Close Quit 6 Rates for the law of mass action For a binary reaction A 1 + A 2 A 3 or A 1 + A 2 A 3 + A 4 λ k (x) = κ k x 1 x 2 For A 1 A 2 or A 1 A 2 + A 3, λ k (x) = κ k x 1. For 2A 1 A 2, λ k (x) = κ k x 1 (x 1 1). For a binary reaction A 1 +A 2 A 3, the rate should vary inversely with volume, so it would be better to write λ N k (x) = κ k N 1 x 1 x 2 = Nκ k z 1 z 2, where classically, N is taken to be the volume of the system times Avogadro s number and z i = N 1 x i is the concentration in moles per unit volume. Note that unary reaction rates also satisfy λ k (x) = κ k x i = Nκ k z i.

7 First Prev Next Go To Go Back Full Screen Close Quit 7 General form for classical scaling All the rates naturally satisfy λ N k (x) Nκ k i z ν ik i N λ k (z). For example, for 2A 1 A 2 and z 1 = N 1 x 1, 1 N κ kx 1 (x 1 1) = Nκ k z 1 (z 1 1 N ) Nκ kz 2 1.

8 First Prev Next Go To Go Back Full Screen Close Quit 8 First scaling limit Setting C N (t) = N 1 X(t) C N (t) = C N () + k C N () + k N 1 Y k ( N 1 Y k (N λ N k (X(s))ds)(ν k ν k ) λ k (C N (s))ds)(ν k ν k ) The law of large numbers for the Poisson process implies N 1 Y (Nu) u, C N (t) C N () + κ k Ci N (s) ν ik (ν k ν k )ds, k i which in the large volume limit gives the classical deterministic law of mass action Ċ(t) = κ k C i (t) ν ik (ν k ν k ) F (C(t)). k i

9 First Prev Next Go To Go Back Full Screen Close Quit 9 Multiple scales Let N >> 1. For each species i, define the normalized abundances (or simply, the abundances) by Z i (t) = N α i X i (t), where α i should be selected so that Z i = O(1). Note that the abundance may be the species number (α i = ) or the species concentration or something else. The rate constants may also vary over several orders of magnitude κ k = κ kn β k, so for a binary reaction κ kx i x j = N β k+α i +α j κ k z i z j

10 First Prev Next Go To Go Back Full Screen Close Quit 1 A parameterized family of models Let Z N i (t) = Z i () + k N α i Y k ( N β k+ν k α λ k (Z N (s))ds)(ν ik ν ik ). Then the true model is Z = Z N.

11 First Prev Next Go To Go Back Full Screen Close Quit 11 Example: Michaelis-Menten kinetics Consider the reaction system A + E AE B + E modeled as a continuous time Markov chain satisfying X A (t) = X A () Y 1 ( X E (t) = X E () Y 1 ( +Y 3 ( κ 1X A (s)x E (s)ds) + Y 2 ( κ 1X A (s)x E (s)ds) + Y 2 ( κ 3X AE (s)ds) X B (t) = Y 3 ( κ 3X AE (s)ds) κ 2, κ 3 >> κ 1 κ 2X AE (s)ds) κ 2X AE (s)ds)

12 First Prev Next Go To Go Back Full Screen Close Quit 12 Scaling Note that M = X AE (t) + X E (t) is constant. Let N = O(X A ) >> M. Setting β 2 = β 3 = 1, α A = 1, α E = α AE =, κ 1 = κ 1, κ 2 = κ 2N 1, κ 3 = κ 3N 1 V E (t) = M 1 X E (s)ds, Z A (t) = N 1 X A (t) Z A (t) = Z A () N 1 Y 1 (N = Z A () N 1 Y 1 (N κ 1 MZ A (s)m 1 X E (s)ds) + N 1 Y 2 (Nκ 2 X AE (s)ds) κ 1 MZ A (s)dv E (s)) + N 1 Y 2 (Nκ 2 M(t V E (t)))

13 First Prev Next Go To Go Back Full Screen Close Quit 13 Analysis Similarly, X E (t) = X E () Y 1 (N +Y 3 (Nκ 3 M(t V E (t))) and dividing by N and letting N, ( (κ 2 + κ 3 )M(t V E (t))) Also lim N lim N κ 1 MZ A (s)dv E (s)) + Y 2 (Nκ 2 M(t V E (t))) ) κ 1 MZ A (s)dv E (s) =. ( ) Z A (t) Z A () + κ 1 MZ A (s)dv E (s) κ 2 M(t V E (t)) =

14 First Prev Next Go To Go Back Full Screen Close Quit 14 Derivation of Michaelis-Menten equation Theorem 1 (Darden [2, 3]) Assume that N and ZA N() = X A()/N x A (). Then (ZA N, V E N) converges to (x A(t), v E (t)) satisfying x A (t) = x A () = and hence v E (s) = κ 1 Mx A (s) v E (s)ds + κ 1 x A (s) v E (s)ds + κ 2 +κ 3 κ 2 +κ 3 +κ 1 x A (s) and ẋ A (t) = Mκ 1κ 3 x A (t) κ 2 + κ 3 + κ 1 x A (t). κ 2 M(1 v E (s))ds (κ 2 + κ 3 )(1 v E (s))ds,

15 First Prev Next Go To Go Back Full Screen Close Quit 15 Example: Model of a viral infection Srivastava, You, Summers, and Yin [5], Haseltine and Rawlings [4], Ball, Kurtz, Popovic, and Rampala [1] Three time-varying species, the viral template, the viral genome, and the viral structural protein (indexed, 1, 2, 3 respectively). The model involves six reactions, T + stuff κ 1 T + G G κ 2 T T + stuff κ 3 T + S T κ 4 S κ 5 G + S κ 6 V

16 First Prev Next Go To Go Back Full Screen Close Quit 16 Stochastic system X 1 (t) = X 1 () + Y b ( X 2 (t) = X 2 () + Y a ( X 3 (t) = X 3 () + Y c ( κ 2X 2 (s)ds) Y d ( κ 1X 1 (s)ds) Y b ( Y f ( κ 6X 2 (s)x 3 (s)ds) κ 3X 1 (s)ds) Y e ( Y f ( κ 6X 2 (s)x 3 (s)ds) κ 4X 1 (s)ds) κ 2X 2 (s)ds) κ 5X 3 (s)ds)

17 Figure 1: Simulation (Haseltine and Rawlings 22) First Prev Next Go To Go Back Full Screen Close Quit 17

18 First Prev Next Go To Go Back Full Screen Close Quit 18 Scaling parameters Each X i is scaled according to its abundance in the system. For N = 1, X 1 = O(N ), X 2 = O(N 2/3 ), and X 3 = O(N ) and we take Z 1 = X 1, Z 2 = X 2 N 2/3, and Z 3 = X 3 N 1. Expressing the rate constants in terms of N = 1 κ κ N 2/3 κ 3 1 N κ κ κ N 5/3

19 First Prev Next Go To Go Back Full Screen Close Quit 19 Normalized system With the scaled rate constants, we have Z N 1 (t) = Z N 1 () + Y b ( Z N 2 (t) = Z N 2 () + N 2/3 Y a ( 2.5Z N 2 (s)ds) Y d ( N 2/3 Y f ( Z3 N (t) = Z3 N () + N 1 Y c ( N 1 Y f ( Z N 1 (s)ds) N 2/3 Y b (.25Z N 1 (s)ds).75z N 2 (s)z N 3 (s)ds) NZ N 1 (s)ds) N 1 Y e (.75Z N 2 (s)z N 3 (s)ds), 2.5Z N 2 (s)ds) 2NZ N 3 (s)ds)

20 First Prev Next Go To Go Back Full Screen Close Quit 2 Limiting system With the scaled rate constants, we have Z 1 (t) = Z 1 () + Y b ( Z 2 (t) = Z 2 () Z 3 (t) = Z 3 () + 2.5Z 2 (s)ds) Y d ( Z 1 (s)ds 2Z 3 (s)ds.25z 1 (s)ds)

21 First Prev Next Go To Go Back Full Screen Close Quit 21 Fast time scale Define V N i (t) = Z i (N 2/3 t). V N 1 (t) = V N 1 () + Y b ( V N 2 (t) = V N 2 () + N 2/3 Y a ( V3 N (t) = V3 N () + N 1 Y c ( 2.5N 2/3 V2 N (s)ds) Y d ( N 2/3 V1 N (s)ds) N 2/3 Y b ( N 2/3 Y f (N 2/3 2.5N 2/3 V N 2 (s)ds) N 5/3 V1 N (s)ds) N 1 Y e ( N 1 Y f (.25N 2/3 V N 1 (s)ds).75v2 N (s)v3 N (s)ds).75n 2/3 V N 2 (s)v N 3 (s)ds) 2N 5/3 V N 3 (s)ds)

22 First Prev Next Go To Go Back Full Screen Close Quit 22 Averaging As N, dividing the equations for V1 N and V3 N by N 2/3 shows that V N 1 (s)ds 1 V N 3 (s)ds 5 V N 2 (s)ds V N 2 (s)ds. The assertion for V3 N and the fact that V2 N is asymptotically regular imply V2 N (s)v3 N (s)ds 5 V2 N (s) 2 ds. It follows that V2 N converges to the solution of (1).

23 First Prev Next Go To Go Back Full Screen Close Quit 23 Law of large numbers Theorem 2 For each δ > and t >, where V 2 is the solution of lim P { sup V2 N (s) V 2 (s) δ} =, N s t V 2 (t) = V 2 () + 7.5V 2 (s)ds) 3.75V 2 (s) 2 ds. (1)

24 First Prev Next Go To Go Back Full Screen Close Quit The Whole System The Reduced System when γ= 3 X1:Viral Template X1:Viral Template 2.5 The Number of X The Number of X Time Time The Whole System The Reduced System when γ= 12 X3:Viral Structural Protein 12 X3:Viral Structural Protein The Number of X The Number of X Time Time

25 First Prev Next Go To Go Back Full Screen Close Quit The Whole System The Reduced System when γ= 3 X2:Viral Genome X2:Viral Genome 25 The Number of X The Number of X Time Time

26 First Prev Next Go To Go Back Full Screen Close Quit The Whole System The Reduced System when γ=2/3 25 X2:Viral Genome X2:Viral Genome The Number of X The Number of X Time Time

27 First Prev Next Go To Go Back Full Screen Close Quit The Whole System The Reduced System when γ=2/3 35 X1:Viral Template X1:Viral Template 3 The Number of X The Number of X Time Time 16 The Whole System X3:Viral Structural Protein 16 The Reduced System when γ=2/3 X3:Viral Structural Protein The Number of X The Number of X Time Time

28 First Prev Next Go To Go Back Full Screen Close Quit 28 References [1] Karen Ball, Thomas G. Kurtz, Lea Popovic, and Greg Rempala. Asymptotic analysis of multiscale approximations to reaction networks. Ann. Appl. Probab., 16(4): , 26. [2] Thomas Darden. A pseudo-steady state approximation for stochastic chemical kinetics. Rocky Mountain J. Math., 9(1):51 71, Conference on Deterministic Differential Equations and Stochastic Processes Models for Biological Systems (San Cristobal, N.M., 1977). [3] Thomas A. Darden. Enzyme kinetics: stochastic vs. deterministic models. In Instabilities, bifurcations, and fluctuations in chemical systems (Austin, Tex., 198), pages Univ. Texas Press, Austin, TX, [4] Eric L. Haseltine and James B. Rawlings. Approximate simulation of coupled fast and slow reactions for stochastic chemical kinetics. J. Chem. Phys., 117(15): , 22. [5] R. Srivastava, L. You, J. Summers, and J. Yin. Stochastic vs. deterministic modeling of intracellular viral kinetics. J. Theoret. Biol., 218(3):39 321, 22.

29 First Prev Next Go To Go Back Full Screen Close Quit 29 Abstract Stochastic models for chemical reactions Attempts to model chemical reactions within biological cells have led to renewed interest in stochastic models for these systems. The classical stochastic models for chemical reaction networks will be reviewed, and multiscale methods for model reduction will be described. The methods will be illustrated with derivation of the Michaelis-Menten model for enzyme reactions and a simple model of viral infection of a cell.

Separation of time scales and averaging of fast subsystems for stochastic chemical reaction models

Separation of time scales and averaging of fast subsystems for stochastic chemical reaction models First Prev Next Go To Go Back Full Screen Close Quit 1 Separation of time scales and averaging of fast subsystems for stochastic chemical reaction models 1. Stochastic equations for counting processes

More information

Separation of time-scales and model reduction for stochastic reaction networks

Separation of time-scales and model reduction for stochastic reaction networks Separation of time-scales and model reduction for stochastic reaction networks arxiv:111.1672v1 [math.pr] 7 Nov 21 Hye-Won Kang Thomas G. Kurtz Department of Mathematics Departments of Mathematics and

More information

A shout-out to IMA Year on Probability and Statistics in Complex Systems. Ball + P opovic + Rempala + Kurtz

A shout-out to IMA Year on Probability and Statistics in Complex Systems. Ball + P opovic + Rempala + Kurtz A shout-out to IMA 23-24 Year on Probability and Statistics in Complex Systems. Ball + P opovic + Rempala + Kurtz IMA F RG F RG F RG + Ball F RG + Craciun + Y in F RG F RG+!!!!!!!!!!!W illiams(unfunded

More information

Continuous time Markov chains and models of chemical reaction networks

Continuous time Markov chains and models of chemical reaction networks First Prev Next Go To Go Back Full Screen Close Quit 1 Continuous time Markov chains and models of chemical reaction networks 1. Modeling counting processes by intensities 2. Continuous time Markov chains

More information

Multi-level Monte Carlo and stochastically modeled biochemical reaction systems

Multi-level Monte Carlo and stochastically modeled biochemical reaction systems Multi-level Monte Carlo and stochastically modeled biochemical reaction systems David F. Anderson anderson@math.wisc.edu Department of Mathematics University of Wisconsin - Madison University of South

More information

CONTINUOUS TIME MARKOV CHAIN MODELS FOR CHEMICAL REACTION NETWORKS

CONTINUOUS TIME MARKOV CHAIN MODELS FOR CHEMICAL REACTION NETWORKS Chapter 1 CONTINUOUS TIME MARKOV CHAIN MODELS FOR CHEMICAL REACTION NETWORKS David F. Anderson Departments of Mathematics University of Wisconsin - Madison 48 Lincoln Drive Madison, WI 5376-1388 http://www.math.wisc.edu/

More information

Averaging fast subsystems

Averaging fast subsystems First Prev Next Go To Go Back Full Screen Close Quit 1 Martingale problems General approaches to averaging Convergence of random measures Convergence of occupation measures Well-mixed reactions Michaelis-Menten

More information

The total quasi-steady state assumption: its justification by singular perturbation and its application to the chemical master equation

The total quasi-steady state assumption: its justification by singular perturbation and its application to the chemical master equation ANZIAM J. 50 (CTAC2008) pp.c429 C443, 2008 C429 The total quasi-steady state assumption: its justification by singular perturbation and its application to the chemical master equation C. F. Khoo 1 M. Hegland

More information

SEPARATION OF TIME-SCALES AND MODEL REDUCTION FOR STOCHASTIC REACTION NETWORKS 1

SEPARATION OF TIME-SCALES AND MODEL REDUCTION FOR STOCHASTIC REACTION NETWORKS 1 The Annals of Applied Probability 3, Vol. 3, No., 59 583 DOI:.4/-AAP84 Institute of Mathematical Statistics, 3 SEPARATION OF TIME-SCALES AND MODEL REDUCTION FOR STOCHASTIC REACTION NETWORKS BY HYE-WON

More information

CENTRAL LIMIT THEOREMS AND DIFFUSION APPROXIMATIONS FOR MULTISCALE MARKOV CHAIN MODELS 1

CENTRAL LIMIT THEOREMS AND DIFFUSION APPROXIMATIONS FOR MULTISCALE MARKOV CHAIN MODELS 1 The Annals of Applied Probability 14, Vol. 4, o., 71 759 DOI: 1.114/13-AAP934 Institute of Mathematical Statistics, 14 CETRAL LIMIT THEOREMS AD DIFFUSIO APPROXIMATIOS FOR MULTISCALE MARKOV CHAI MODELS

More information

A Comparison Of Stochastic Systems With Different Types Of Delays

A Comparison Of Stochastic Systems With Different Types Of Delays A omparison Of Stochastic Systems With Different Types Of Delays H.T. Banks, Jared atenacci and Shuhua Hu enter for Research in Scientific omputation, North arolina State University Raleigh, N 27695-8212

More information

Quasi-steady-state approximations derived from the stochastic model of enzyme kinetics

Quasi-steady-state approximations derived from the stochastic model of enzyme kinetics Quasi-steady-state approximations derived from the stochastic model of enzyme kinetics arxiv:1711.2791v1 [q-bio.mn] 8 Nov 217 Hye-Won Kang Wasiur R. KhudaBukhsh Heinz Koeppl Grzegorz A. Rempała June 24,

More information

Housing Prices and Growth

Housing Prices and Growth Housing Prices and Growth James A. Kahn June 2007 Motivation Housing market boom-bust has prompted talk of bubbles. But what are fundamentals? What is the right benchmark? Motivation Housing market boom-bust

More information

SPDE and portfolio choice (joint work with M. Musiela) Princeton University. Thaleia Zariphopoulou The University of Texas at Austin

SPDE and portfolio choice (joint work with M. Musiela) Princeton University. Thaleia Zariphopoulou The University of Texas at Austin SPDE and portfolio choice (joint work with M. Musiela) Princeton University November 2007 Thaleia Zariphopoulou The University of Texas at Austin 1 Performance measurement of investment strategies 2 Market

More information

Optimal Securitization via Impulse Control

Optimal Securitization via Impulse Control Optimal Securitization via Impulse Control Rüdiger Frey (joint work with Roland C. Seydel) Mathematisches Institut Universität Leipzig and MPI MIS Leipzig Bachelier Finance Society, June 21 (1) Optimal

More information

Control Improvement for Jump-Diffusion Processes with Applications to Finance

Control Improvement for Jump-Diffusion Processes with Applications to Finance Control Improvement for Jump-Diffusion Processes with Applications to Finance Nicole Bäuerle joint work with Ulrich Rieder Toronto, June 2010 Outline Motivation: MDPs Controlled Jump-Diffusion Processes

More information

Stability in geometric & functional inequalities

Stability in geometric & functional inequalities Stability in geometric & functional inequalities A. Figalli The University of Texas at Austin www.ma.utexas.edu/users/figalli/ Alessio Figalli (UT Austin) Stability in geom. & funct. ineq. Krakow, July

More information

EFFICIENT MONTE CARLO ALGORITHM FOR PRICING BARRIER OPTIONS

EFFICIENT MONTE CARLO ALGORITHM FOR PRICING BARRIER OPTIONS Commun. Korean Math. Soc. 23 (2008), No. 2, pp. 285 294 EFFICIENT MONTE CARLO ALGORITHM FOR PRICING BARRIER OPTIONS Kyoung-Sook Moon Reprinted from the Communications of the Korean Mathematical Society

More information

Stochastic Partial Differential Equations and Portfolio Choice. Crete, May Thaleia Zariphopoulou

Stochastic Partial Differential Equations and Portfolio Choice. Crete, May Thaleia Zariphopoulou Stochastic Partial Differential Equations and Portfolio Choice Crete, May 2011 Thaleia Zariphopoulou Oxford-Man Institute and Mathematical Institute University of Oxford and Mathematics and IROM, The University

More information

Rohini Kumar. Statistics and Applied Probability, UCSB (Joint work with J. Feng and J.-P. Fouque)

Rohini Kumar. Statistics and Applied Probability, UCSB (Joint work with J. Feng and J.-P. Fouque) Small time asymptotics for fast mean-reverting stochastic volatility models Statistics and Applied Probability, UCSB (Joint work with J. Feng and J.-P. Fouque) March 11, 2011 Frontier Probability Days,

More information

Local vs Non-local Forward Equations for Option Pricing

Local vs Non-local Forward Equations for Option Pricing Local vs Non-local Forward Equations for Option Pricing Rama Cont Yu Gu Abstract When the underlying asset is a continuous martingale, call option prices solve the Dupire equation, a forward parabolic

More information

Extended Libor Models and Their Calibration

Extended Libor Models and Their Calibration Extended Libor Models and Their Calibration Denis Belomestny Weierstraß Institute Berlin Vienna, 16 November 2007 Denis Belomestny (WIAS) Extended Libor Models and Their Calibration Vienna, 16 November

More information

The stochastic calculus

The stochastic calculus Gdansk A schedule of the lecture Stochastic differential equations Ito calculus, Ito process Ornstein - Uhlenbeck (OU) process Heston model Stopping time for OU process Stochastic differential equations

More information

Analysing multi-level Monte Carlo for options with non-globally Lipschitz payoff

Analysing multi-level Monte Carlo for options with non-globally Lipschitz payoff Finance Stoch 2009 13: 403 413 DOI 10.1007/s00780-009-0092-1 Analysing multi-level Monte Carlo for options with non-globally Lipschitz payoff Michael B. Giles Desmond J. Higham Xuerong Mao Received: 1

More information

A No-Arbitrage Theorem for Uncertain Stock Model

A No-Arbitrage Theorem for Uncertain Stock Model Fuzzy Optim Decis Making manuscript No (will be inserted by the editor) A No-Arbitrage Theorem for Uncertain Stock Model Kai Yao Received: date / Accepted: date Abstract Stock model is used to describe

More information

Numerical Solution of Stochastic Differential Equations with Jumps in Finance

Numerical Solution of Stochastic Differential Equations with Jumps in Finance Numerical Solution of Stochastic Differential Equations with Jumps in Finance Eckhard Platen School of Finance and Economics and School of Mathematical Sciences University of Technology, Sydney Kloeden,

More information

Convergence Analysis of Monte Carlo Calibration of Financial Market Models

Convergence Analysis of Monte Carlo Calibration of Financial Market Models Analysis of Monte Carlo Calibration of Financial Market Models Christoph Käbe Universität Trier Workshop on PDE Constrained Optimization of Certain and Uncertain Processes June 03, 2009 Monte Carlo Calibration

More information

Simulating Continuous Time Rating Transitions

Simulating Continuous Time Rating Transitions Bus 864 1 Simulating Continuous Time Rating Transitions Robert A. Jones 17 March 2003 This note describes how to simulate state changes in continuous time Markov chains. An important application to credit

More information

A pathwise derivative approach to the computation of parameter sensitivities in discrete stochastic chemical systems

A pathwise derivative approach to the computation of parameter sensitivities in discrete stochastic chemical systems THE JOURNAL OF CHEMICAL PHYSICS 136, 34115 (212) A pathwise derivative approach to the computation of parameter sensitivities in discrete stochastic chemical systems Patrick W. Sheppard, 1,a),b) Muruhan

More information

Pricing in markets modeled by general processes with independent increments

Pricing in markets modeled by general processes with independent increments Pricing in markets modeled by general processes with independent increments Tom Hurd Financial Mathematics at McMaster www.phimac.org Thanks to Tahir Choulli and Shui Feng Financial Mathematics Seminar

More information

Estimation of Value at Risk and ruin probability for diffusion processes with jumps

Estimation of Value at Risk and ruin probability for diffusion processes with jumps Estimation of Value at Risk and ruin probability for diffusion processes with jumps Begoña Fernández Universidad Nacional Autónoma de México joint work with Laurent Denis and Ana Meda PASI, May 21 Begoña

More information

Indifference fee rate 1

Indifference fee rate 1 Indifference fee rate 1 for variable annuities Ricardo ROMO ROMERO Etienne CHEVALIER and Thomas LIM Université d Évry Val d Essonne, Laboratoire de Mathématiques et Modélisation d Evry Second Young researchers

More information

Credit Risk Models with Filtered Market Information

Credit Risk Models with Filtered Market Information Credit Risk Models with Filtered Market Information Rüdiger Frey Universität Leipzig Bressanone, July 2007 ruediger.frey@math.uni-leipzig.de www.math.uni-leipzig.de/~frey joint with Abdel Gabih and Thorsten

More information

Tangent Lévy Models. Sergey Nadtochiy (joint work with René Carmona) Oxford-Man Institute of Quantitative Finance University of Oxford.

Tangent Lévy Models. Sergey Nadtochiy (joint work with René Carmona) Oxford-Man Institute of Quantitative Finance University of Oxford. Tangent Lévy Models Sergey Nadtochiy (joint work with René Carmona) Oxford-Man Institute of Quantitative Finance University of Oxford June 24, 2010 6th World Congress of the Bachelier Finance Society Sergey

More information

Monte Carlo Simulation of a Two-Factor Stochastic Volatility Model

Monte Carlo Simulation of a Two-Factor Stochastic Volatility Model Monte Carlo Simulation of a Two-Factor Stochastic Volatility Model asymptotic approximation formula for the vanilla European call option price. A class of multi-factor volatility models has been introduced

More information

Chapter 3: Black-Scholes Equation and Its Numerical Evaluation

Chapter 3: Black-Scholes Equation and Its Numerical Evaluation Chapter 3: Black-Scholes Equation and Its Numerical Evaluation 3.1 Itô Integral 3.1.1 Convergence in the Mean and Stieltjes Integral Definition 3.1 (Convergence in the Mean) A sequence {X n } n ln of random

More information

Contagion models with interacting default intensity processes

Contagion models with interacting default intensity processes Contagion models with interacting default intensity processes Yue Kuen KWOK Hong Kong University of Science and Technology This is a joint work with Kwai Sun Leung. 1 Empirical facts Default of one firm

More information

Stock Loan Valuation Under Brownian-Motion Based and Markov Chain Stock Models

Stock Loan Valuation Under Brownian-Motion Based and Markov Chain Stock Models Stock Loan Valuation Under Brownian-Motion Based and Markov Chain Stock Models David Prager 1 1 Associate Professor of Mathematics Anderson University (SC) Based on joint work with Professor Qing Zhang,

More information

Carnets d ordres pilotés par des processus de Hawkes

Carnets d ordres pilotés par des processus de Hawkes Carnets d ordres pilotés par des processus de Hawkes workshop sur les Mathématiques des marchés financiers en haute fréquence Frédéric Abergel Chaire de finance quantitative fiquant.mas.ecp.fr/limit-order-books

More information

Construction and behavior of Multinomial Markov random field models

Construction and behavior of Multinomial Markov random field models Graduate Theses and Dissertations Iowa State University Capstones, Theses and Dissertations 2010 Construction and behavior of Multinomial Markov random field models Kim Mueller Iowa State University Follow

More information

Computation of one-sided probability density functions from their cumulants

Computation of one-sided probability density functions from their cumulants Journal of Mathematical Chemistry, Vol. 41, No. 1, January 27 26) DOI: 1.17/s191-6-969-x Computation of one-sided probability density functions from their cumulants Mário N. Berberan-Santos Centro de Química-Física

More information

Rough volatility models: When population processes become a new tool for trading and risk management

Rough volatility models: When population processes become a new tool for trading and risk management Rough volatility models: When population processes become a new tool for trading and risk management Omar El Euch and Mathieu Rosenbaum École Polytechnique 4 October 2017 Omar El Euch and Mathieu Rosenbaum

More information

3.4 Copula approach for modeling default dependency. Two aspects of modeling the default times of several obligors

3.4 Copula approach for modeling default dependency. Two aspects of modeling the default times of several obligors 3.4 Copula approach for modeling default dependency Two aspects of modeling the default times of several obligors 1. Default dynamics of a single obligor. 2. Model the dependence structure of defaults

More information

Accelerated Stochastic Gradient Descent Praneeth Netrapalli MSR India

Accelerated Stochastic Gradient Descent Praneeth Netrapalli MSR India Accelerated Stochastic Gradient Descent Praneeth Netrapalli MSR India Presented at OSL workshop, Les Houches, France. Joint work with Prateek Jain, Sham M. Kakade, Rahul Kidambi and Aaron Sidford Linear

More information

The Neoclassical Growth Model

The Neoclassical Growth Model The Neoclassical Growth Model 1 Setup Three goods: Final output Capital Labour One household, with preferences β t u (c t ) (Later we will introduce preferences with respect to labour/leisure) Endowment

More information

Affine term structures for interest rate models

Affine term structures for interest rate models Stefan Tappe Albert Ludwig University of Freiburg, Germany UNSW-Macquarie WORKSHOP Risk: modelling, optimization and inference Sydney, December 7th, 2017 Introduction Affine processes in finance: R = a

More information

Anumericalalgorithm for general HJB equations : a jump-constrained BSDE approach

Anumericalalgorithm for general HJB equations : a jump-constrained BSDE approach Anumericalalgorithm for general HJB equations : a jump-constrained BSDE approach Nicolas Langrené Univ. Paris Diderot - Sorbonne Paris Cité, LPMA, FiME Joint work with Idris Kharroubi (Paris Dauphine),

More information

Order driven markets : from empirical properties to optimal trading

Order driven markets : from empirical properties to optimal trading Order driven markets : from empirical properties to optimal trading Frédéric Abergel Latin American School and Workshop on Data Analysis and Mathematical Modelling of Social Sciences 9 november 2016 F.

More information

Outline Brownian Process Continuity of Sample Paths Differentiability of Sample Paths Simulating Sample Paths Hitting times and Maximum

Outline Brownian Process Continuity of Sample Paths Differentiability of Sample Paths Simulating Sample Paths Hitting times and Maximum Normal Distribution and Brownian Process Page 1 Outline Brownian Process Continuity of Sample Paths Differentiability of Sample Paths Simulating Sample Paths Hitting times and Maximum Searching for a Continuous-time

More information

Analytical formulas for local volatility model with stochastic. Mohammed Miri

Analytical formulas for local volatility model with stochastic. Mohammed Miri Analytical formulas for local volatility model with stochastic rates Mohammed Miri Joint work with Eric Benhamou (Pricing Partners) and Emmanuel Gobet (Ecole Polytechnique Modeling and Managing Financial

More information

Extended Libor Models and Their Calibration

Extended Libor Models and Their Calibration Extended Libor Models and Their Calibration Denis Belomestny Weierstraß Institute Berlin Haindorf, 7 Februar 2008 Denis Belomestny (WIAS) Extended Libor Models and Their Calibration Haindorf, 7 Februar

More information

Pricing of some exotic options with N IG-Lévy input

Pricing of some exotic options with N IG-Lévy input Pricing of some exotic options with N IG-Lévy input Sebastian Rasmus, Søren Asmussen 2 and Magnus Wiktorsson Center for Mathematical Sciences, University of Lund, Box 8, 22 00 Lund, Sweden {rasmus,magnusw}@maths.lth.se

More information

Slides 4. Matthieu Gomez Fall 2017

Slides 4. Matthieu Gomez Fall 2017 Slides 4 Matthieu Gomez Fall 2017 How to Compute Stationary Distribution of a Diffusion? Kolmogorov Forward Take a diffusion process dx t = µ(x t )dt + σ(x t )dz t How does the density of x t evolves?

More information

SHORT-TIME IMPLIED VOLATILITY IN EXPONENTIAL LÉVY MODELS

SHORT-TIME IMPLIED VOLATILITY IN EXPONENTIAL LÉVY MODELS SHORT-TIME IMPLIED VOLATILITY IN EXPONENTIAL LÉVY MODELS ERIK EKSTRÖM1 AND BING LU Abstract. We show that a necessary and sufficient condition for the explosion of implied volatility near expiry in exponential

More information

Pricing and hedging with rough-heston models

Pricing and hedging with rough-heston models Pricing and hedging with rough-heston models Omar El Euch, Mathieu Rosenbaum Ecole Polytechnique 1 January 216 El Euch, Rosenbaum Pricing and hedging with rough-heston models 1 Table of contents Introduction

More information

A Numerical Approach to the Estimation of Search Effort in a Search for a Moving Object

A Numerical Approach to the Estimation of Search Effort in a Search for a Moving Object Proceedings of the 1. Conference on Applied Mathematics and Computation Dubrovnik, Croatia, September 13 18, 1999 pp. 129 136 A Numerical Approach to the Estimation of Search Effort in a Search for a Moving

More information

Log-linear Dynamics and Local Potential

Log-linear Dynamics and Local Potential Log-linear Dynamics and Local Potential Daijiro Okada and Olivier Tercieux [This version: November 28, 2008] Abstract We show that local potential maximizer ([15]) with constant weights is stochastically

More information

The Limiting Distribution for the Number of Symbol Comparisons Used by QuickSort is Nondegenerate (Extended Abstract)

The Limiting Distribution for the Number of Symbol Comparisons Used by QuickSort is Nondegenerate (Extended Abstract) The Limiting Distribution for the Number of Symbol Comparisons Used by QuickSort is Nondegenerate (Extended Abstract) Patrick Bindjeme 1 James Allen Fill 1 1 Department of Applied Mathematics Statistics,

More information

The Stigler-Luckock model with market makers

The Stigler-Luckock model with market makers Prague, January 7th, 2017. Order book Nowadays, demand and supply is often realized by electronic trading systems storing the information in databases. Traders with access to these databases quote their

More information

Riemannian Geometry, Key to Homework #1

Riemannian Geometry, Key to Homework #1 Riemannian Geometry Key to Homework # Let σu v sin u cos v sin u sin v cos u < u < π < v < π be a parametrization of the unit sphere S {x y z R 3 x + y + z } Fix an angle < θ < π and consider the parallel

More information

The Market Price of Risk and the Equity Premium: A Legacy of the Great Depression? by Cogley and Sargent

The Market Price of Risk and the Equity Premium: A Legacy of the Great Depression? by Cogley and Sargent The Market Price of Risk and the Equity Premium: A Legacy of the Great Depression? by Cogley and Sargent James Bullard 21 February 2007 Friedman and Schwartz The paper for this lecture is The Market Price

More information

Volatility. Roberto Renò. 2 March 2010 / Scuola Normale Superiore. Dipartimento di Economia Politica Università di Siena

Volatility. Roberto Renò. 2 March 2010 / Scuola Normale Superiore. Dipartimento di Economia Politica Università di Siena Dipartimento di Economia Politica Università di Siena 2 March 2010 / Scuola Normale Superiore What is? The definition of volatility may vary wildly around the idea of the standard deviation of price movements

More information

Economathematics. Problem Sheet 1. Zbigniew Palmowski. Ws 2 dw s = 1 t

Economathematics. Problem Sheet 1. Zbigniew Palmowski. Ws 2 dw s = 1 t Economathematics Problem Sheet 1 Zbigniew Palmowski 1. Calculate Ee X where X is a gaussian random variable with mean µ and volatility σ >.. Verify that where W is a Wiener process. Ws dw s = 1 3 W t 3

More information

Square-Root Measurement for Ternary Coherent State Signal

Square-Root Measurement for Ternary Coherent State Signal ISSN 86-657 Square-Root Measurement for Ternary Coherent State Signal Kentaro Kato Quantum ICT Research Institute, Tamagawa University 6-- Tamagawa-gakuen, Machida, Tokyo 9-86, Japan Tamagawa University

More information

Saddlepoint Approximation Methods for Pricing. Financial Options on Discrete Realized Variance

Saddlepoint Approximation Methods for Pricing. Financial Options on Discrete Realized Variance Saddlepoint Approximation Methods for Pricing Financial Options on Discrete Realized Variance Yue Kuen KWOK Department of Mathematics Hong Kong University of Science and Technology Hong Kong * This is

More information

Parameters Estimation in Stochastic Process Model

Parameters Estimation in Stochastic Process Model Parameters Estimation in Stochastic Process Model A Quasi-Likelihood Approach Ziliang Li University of Maryland, College Park GEE RIT, Spring 28 Outline 1 Model Review The Big Model in Mind: Signal + Noise

More information

Optimal Dividend Policy of A Large Insurance Company with Solvency Constraints. Zongxia Liang

Optimal Dividend Policy of A Large Insurance Company with Solvency Constraints. Zongxia Liang Optimal Dividend Policy of A Large Insurance Company with Solvency Constraints Zongxia Liang Department of Mathematical Sciences Tsinghua University, Beijing 100084, China zliang@math.tsinghua.edu.cn Joint

More information

Math 416/516: Stochastic Simulation

Math 416/516: Stochastic Simulation Math 416/516: Stochastic Simulation Haijun Li lih@math.wsu.edu Department of Mathematics Washington State University Week 13 Haijun Li Math 416/516: Stochastic Simulation Week 13 1 / 28 Outline 1 Simulation

More information

Convergence of Discretized Stochastic (Interest Rate) Processes with Stochastic Drift Term.

Convergence of Discretized Stochastic (Interest Rate) Processes with Stochastic Drift Term. Convergence of Discretized Stochastic (Interest Rate) Processes with Stochastic Drift Term. G. Deelstra F. Delbaen Free University of Brussels, Department of Mathematics, Pleinlaan 2, B-15 Brussels, Belgium

More information

MATH/STAT 4720, Life Contingencies II Fall 2015 Toby Kenney

MATH/STAT 4720, Life Contingencies II Fall 2015 Toby Kenney MATH/STAT 4720, Life Contingencies II Fall 2015 Toby Kenney In Class Examples () September 2, 2016 1 / 145 8 Multiple State Models Definition A Multiple State model has several different states into which

More information

Optimal Stopping for American Type Options

Optimal Stopping for American Type Options Optimal Stopping for Department of Mathematics Stockholm University Sweden E-mail: silvestrov@math.su.se ISI 2011, Dublin, 21-26 August 2011 Outline of communication Multivariate Modulated Markov price

More information

Exam Quantitative Finance (35V5A1)

Exam Quantitative Finance (35V5A1) Exam Quantitative Finance (35V5A1) Part I: Discrete-time finance Exercise 1 (20 points) a. Provide the definition of the pricing kernel k q. Relate this pricing kernel to the set of discount factors D

More information

Numerical schemes for SDEs

Numerical schemes for SDEs Lecture 5 Numerical schemes for SDEs Lecture Notes by Jan Palczewski Computational Finance p. 1 A Stochastic Differential Equation (SDE) is an object of the following type dx t = a(t,x t )dt + b(t,x t

More information

High Frequency Trading in a Regime-switching Model. Yoontae Jeon

High Frequency Trading in a Regime-switching Model. Yoontae Jeon High Frequency Trading in a Regime-switching Model by Yoontae Jeon A thesis submitted in conformity with the requirements for the degree of Master of Science Graduate Department of Mathematics University

More information

Advanced Stochastic Processes.

Advanced Stochastic Processes. Advanced Stochastic Processes. David Gamarnik LECTURE 16 Applications of Ito calculus to finance Lecture outline Trading strategies Black Scholes option pricing formula 16.1. Security price processes,

More information

SYLLABUS AND SAMPLE QUESTIONS FOR MSQE (Program Code: MQEK and MQED) Syllabus for PEA (Mathematics), 2013

SYLLABUS AND SAMPLE QUESTIONS FOR MSQE (Program Code: MQEK and MQED) Syllabus for PEA (Mathematics), 2013 SYLLABUS AND SAMPLE QUESTIONS FOR MSQE (Program Code: MQEK and MQED) 2013 Syllabus for PEA (Mathematics), 2013 Algebra: Binomial Theorem, AP, GP, HP, Exponential, Logarithmic Series, Sequence, Permutations

More information

Introduction to Affine Processes. Applications to Mathematical Finance

Introduction to Affine Processes. Applications to Mathematical Finance and Its Applications to Mathematical Finance Department of Mathematical Science, KAIST Workshop for Young Mathematicians in Korea, 2010 Outline Motivation 1 Motivation 2 Preliminary : Stochastic Calculus

More information

Delay-cost Optimal Coupon Delivery in Mobile Opportunistic Networks

Delay-cost Optimal Coupon Delivery in Mobile Opportunistic Networks Delay-cost Optimal Coupon Delivery in Mobile Opportunistic Networks Srinivasan Venkatramanan 1 Department of ECE, IISc. 19 December 2013 1 Joint work with Prof. Anurag Kumar Srinivasan (IISc.) Coupon Delivery

More information

Effects of Severance Tax on Economic Activity: Evidence from the Oil Industry

Effects of Severance Tax on Economic Activity: Evidence from the Oil Industry Effects of Severance Tax on Economic Activity: Evidence from the Oil Industry Jason P. Brown 1, Peter Maniloff 2, & Dale T. Manning 3 1 Federal Reserve Bank of Kansas City 2 Colorado School of Mines 3

More information

Research Statement. Dapeng Zhan

Research Statement. Dapeng Zhan Research Statement Dapeng Zhan The Schramm-Loewner evolution (SLE), first introduced by Oded Schramm ([12]), is a oneparameter (κ (0, )) family of random non-self-crossing curves, which has received a

More information

Continuous Time Finance. Tomas Björk

Continuous Time Finance. Tomas Björk Continuous Time Finance Tomas Björk 1 II Stochastic Calculus Tomas Björk 2 Typical Setup Take as given the market price process, S(t), of some underlying asset. S(t) = price, at t, per unit of underlying

More information

Statistical Tables Compiled by Alan J. Terry

Statistical Tables Compiled by Alan J. Terry Statistical Tables Compiled by Alan J. Terry School of Science and Sport University of the West of Scotland Paisley, Scotland Contents Table 1: Cumulative binomial probabilities Page 1 Table 2: Cumulative

More information

MASSACHUSETTS INSTITUTE OF TECHNOLOGY 6.265/15.070J Fall 2013 Lecture 19 11/20/2013. Applications of Ito calculus to finance

MASSACHUSETTS INSTITUTE OF TECHNOLOGY 6.265/15.070J Fall 2013 Lecture 19 11/20/2013. Applications of Ito calculus to finance MASSACHUSETTS INSTITUTE OF TECHNOLOGY 6.265/15.7J Fall 213 Lecture 19 11/2/213 Applications of Ito calculus to finance Content. 1. Trading strategies 2. Black-Scholes option pricing formula 1 Security

More information

Dynamic Admission and Service Rate Control of a Queue

Dynamic Admission and Service Rate Control of a Queue Dynamic Admission and Service Rate Control of a Queue Kranthi Mitra Adusumilli and John J. Hasenbein 1 Graduate Program in Operations Research and Industrial Engineering Department of Mechanical Engineering

More information

Likelihood Estimation of Jump-Diffusions

Likelihood Estimation of Jump-Diffusions Likelihood Estimation of Jump-Diffusions Extensions from Diffusions to Jump-Diffusions, Implementation with Automatic Differentiation, and Applications Berent Ånund Strømnes Lunde DEPARTMENT OF MATHEMATICS

More information

1 The continuous time limit

1 The continuous time limit Derivative Securities, Courant Institute, Fall 2008 http://www.math.nyu.edu/faculty/goodman/teaching/derivsec08/index.html Jonathan Goodman and Keith Lewis Supplementary notes and comments, Section 3 1

More information

Term Structure of Credit Spreads of A Firm When Its Underlying Assets are Discontinuous

Term Structure of Credit Spreads of A Firm When Its Underlying Assets are Discontinuous www.sbm.itb.ac.id/ajtm The Asian Journal of Technology Management Vol. 3 No. 2 (2010) 69-73 Term Structure of Credit Spreads of A Firm When Its Underlying Assets are Discontinuous Budhi Arta Surya *1 1

More information

Dynamic Replication of Non-Maturing Assets and Liabilities

Dynamic Replication of Non-Maturing Assets and Liabilities Dynamic Replication of Non-Maturing Assets and Liabilities Michael Schürle Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstr. 6, CH-9000 St. Gallen, Switzerland

More information

Multiname and Multiscale Default Modeling

Multiname and Multiscale Default Modeling Multiname and Multiscale Default Modeling Jean-Pierre Fouque University of California Santa Barbara Joint work with R. Sircar (Princeton) and K. Sølna (UC Irvine) Special Semester on Stochastics with Emphasis

More information

Lecture 2: The Neoclassical Growth Model

Lecture 2: The Neoclassical Growth Model Lecture 2: The Neoclassical Growth Model Florian Scheuer 1 Plan Introduce production technology, storage multiple goods 2 The Neoclassical Model Three goods: Final output Capital Labor One household, with

More information

Final exam solutions

Final exam solutions EE365 Stochastic Control / MS&E251 Stochastic Decision Models Profs. S. Lall, S. Boyd June 5 6 or June 6 7, 2013 Final exam solutions This is a 24 hour take-home final. Please turn it in to one of the

More information

On Packing Densities of Set Partitions

On Packing Densities of Set Partitions On Packing Densities of Set Partitions Adam M.Goyt 1 Department of Mathematics Minnesota State University Moorhead Moorhead, MN 56563, USA goytadam@mnstate.edu Lara K. Pudwell Department of Mathematics

More information

Parametric Inference and Dynamic State Recovery from Option Panels. Torben G. Andersen

Parametric Inference and Dynamic State Recovery from Option Panels. Torben G. Andersen Parametric Inference and Dynamic State Recovery from Option Panels Torben G. Andersen Joint work with Nicola Fusari and Viktor Todorov The Third International Conference High-Frequency Data Analysis in

More information

Probabilistic Analysis of the Economic Impact of Earthquake Prediction Systems

Probabilistic Analysis of the Economic Impact of Earthquake Prediction Systems The Minnesota Journal of Undergraduate Mathematics Probabilistic Analysis of the Economic Impact of Earthquake Prediction Systems Tiffany Kolba and Ruyue Yuan Valparaiso University The Minnesota Journal

More information

Stochastic Volatility Modeling

Stochastic Volatility Modeling Stochastic Volatility Modeling Jean-Pierre Fouque University of California Santa Barbara 28 Daiwa Lecture Series July 29 - August 1, 28 Kyoto University, Kyoto 1 References: Derivatives in Financial Markets

More information

A distributed Laplace transform algorithm for European options

A distributed Laplace transform algorithm for European options A distributed Laplace transform algorithm for European options 1 1 A. J. Davies, M. E. Honnor, C.-H. Lai, A. K. Parrott & S. Rout 1 Department of Physics, Astronomy and Mathematics, University of Hertfordshire,

More information

e-companion ONLY AVAILABLE IN ELECTRONIC FORM

e-companion ONLY AVAILABLE IN ELECTRONIC FORM OPERATIONS RESEARCH doi 1.1287/opre.11.864ec e-companion ONLY AVAILABLE IN ELECTRONIC FORM informs 21 INFORMS Electronic Companion Risk Analysis of Collateralized Debt Obligations by Kay Giesecke and Baeho

More information

A THREE-FACTOR CONVERGENCE MODEL OF INTEREST RATES

A THREE-FACTOR CONVERGENCE MODEL OF INTEREST RATES Proceedings of ALGORITMY 01 pp. 95 104 A THREE-FACTOR CONVERGENCE MODEL OF INTEREST RATES BEÁTA STEHLÍKOVÁ AND ZUZANA ZÍKOVÁ Abstract. A convergence model of interest rates explains the evolution of the

More information

Constructing Markov models for barrier options

Constructing Markov models for barrier options Constructing Markov models for barrier options Gerard Brunick joint work with Steven Shreve Department of Mathematics University of Texas at Austin Nov. 14 th, 2009 3 rd Western Conference on Mathematical

More information

Economic Dynamic Modeling: An Overview of Stability

Economic Dynamic Modeling: An Overview of Stability Student Projects Economic Dynamic Modeling: An Overview of Stability Nathan Berggoetz Nathan Berggoetz is a senior actuarial science and mathematical economics major. After graduation he plans to work

More information