A Nonparametric Approach to Pricing and Hedging Derivative Securities via Learning Networks

We propose a nonparametric method for estimating derivative financial asset pricing formulae using learning networks. To demonstrate feasibility, we first simulate Black-Scholes option prices and show that learning networks can recover the Black-Scholes formula from a two-year training set of daily options prices, and that the resulting network formula can be used successfully to both price and delta-hedge options out-of-sample. For comparison, we estimate models using four popular methods: ordinary least squares, radial basis functions, multilayer perceptrons, and projection pursuit. To illustrate practical relevance, we also apply our approach to S&P 500 futures options data from 1987 to 1991.

An Immersed Interface Method for the Incompressible Navier-Stokes Equations in Irregular Domains

We present an immersed interface method for the incompressible Navier Stokes equations capable of handling rigid immersed boundaries. The immersed boundary is represented by a set of Lagrangian control points. In order to guarantee that the no-slip condition on the boundary is satisfied, singular forces are applied on the fluid at the immersed boundary. The forces are related to the jumps in pressure and the jumps in the derivatives of both pressure and velocity, and are interpolated using cubic splines. The strength of singular forces is determined by solving a small system of equations at each time step. The Navier-Stokes equations are discretized on a staggered Cartesian grid by a second order accurate projection method for pressure and velocity.

Retargeting of pre-set regions on chromosome for high gene expression in mammalian cells

We have developed a system to hunt and reuse special gene integration sites that allow for high and stable gene expression. A vector, named pRGFP8, was constructed. The plasmid pRGFP8 contains a reporter gene, gfp2 and two extraneous DNA fragments. The gene gfp2 makes it possible to screen the high expression regions on the chromosome. The extraneous DNA fragments can help to create the unique loci on the chromosome and increase the gene targeting frequency by increasing the homology. After transfection into Chinese hamster ovary cells (CHO) cells, the linearized pRGFP8 can integrate into the chromosome of the host cells and form the unique sites. With FACS, 90 millions transfected cells were sorted and the cells with strongest GFP expression were isolated, and then 8 stable high expression GFP CHO cell lines were selected as candidates for the new host cell. Taking the unique site created by pRGFP8 on the chromosome in the new host cells as a targeting locus, the gfp2 gene was replaced with the gene of interest, human ifngamma, by transfecting the targeting plasmid pRIH-IFN. Then using FACS, the cells with the dimmest GFP fluorescence were selected. These cells showed they had strong abilities to produce the protein of interest, IFN-gamma. During the gene targeting experiment, we found there is positive correlation between the fluorescence density of the GFP CHO host cells and the specific production rate of IFN-gamma. This result shows that the strategy in our expression system is correct: the production of the interesting protein increases with the increase fluorescence of the GFP host cells. This system, the new host cell lines and the targeting vector, can be utilized for highly expressing the gene of interest. More importantly, by using FACS, we can fully screen all the transfected cells, which can reduce the chances of losing the best cells.