Estimation of jump-diffusion processes via empirical characteristic functions

Preface The starting point for this work and eventually the subject of the whole thesis was the question: how to estimate parameters of the affine stochastic volatility jump-diffusion models. These models are very important for contingent claim pricing. Their major advantage, availability T of analytical solutions for characteristic functions, made them the models of choice for many theoretical constructions and practical applications. At the same time, estimation of parameters of stochastic volatility jump-diffusion models is not a straightforward task. The problem is coming from the variance process, which is non-observable. There are several estimation methodologies that deal with estimation problems of latent variables. One appeared to be particularly interesting. It proposes the estimator that in contrast to the other methods requires neither discretization nor simulation of the process: the Continuous Empirical Characteristic function estimator (EGF) based on the unconditional characteristic function. However, the procedure was derived only for the stochastic volatility models without jumps. Thus, it has become the subject of my research. This thesis consists of three parts. Each one is written as independent and self contained article. At the same time, questions that are answered by the second and third parts of this Work arise naturally from the issues investigated and results obtained in the first one. The first chapter is the theoretical foundation of the thesis. It proposes an estimation procedure for the stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint unconditional characteristic function for the stochastic process. The major analytical result of this part as well as of the whole thesis is the closed form expression for the joint unconditional characteristic function for the stochastic volatility jump-diffusion models. The empirical part of the chapter suggests that besides a stochastic volatility, jumps both in the mean and the volatility equation are relevant for modelling returns of the S&P500 index, which has been chosen as a general representative of the stock asset class. Hence, the next question is: what jump process to use to model returns of the S&P500. The decision about the jump process in the framework of the affine jump- diffusion models boils down to defining the intensity of the compound Poisson process, a constant or some function of state variables, and to choosing the distribution of the jump size. While the jump in the variance process is usually assumed to be exponential, there are at least three distributions of the jump size which are currently used for the asset log-prices: normal, exponential and double exponential. The second part of this thesis shows that normal jumps in the asset log-returns should be used if we are to model S&P500 index by a stochastic volatility jump-diffusion model. This is a surprising result. Exponential distribution has fatter tails and for this reason either exponential or double exponential jump size was expected to provide the best it of the stochastic volatility jump-diffusion models to the data. The idea of testing the efficiency of the Continuous ECF estimator on the simulated data has already appeared when the first estimation results of the first chapter were obtained. In the absence of a benchmark or any ground for comparison it is unreasonable to be sure that our parameter estimates and the true parameters of the models coincide. The conclusion of the second chapter provides one more reason to do that kind of test. Thus, the third part of this thesis concentrates on the estimation of parameters of stochastic volatility jump- diffusion models on the basis of the asset price time-series simulated from various "true" parameter sets. The goal is to show that the Continuous ECF estimator based on the joint unconditional characteristic function is capable of finding the true parameters. And, the third chapter proves that our estimator indeed has the ability to do so. Once it is clear that the Continuous ECF estimator based on the unconditional characteristic function is working, the next question does not wait to appear. The question is whether the computation effort can be reduced without affecting the efficiency of the estimator, or whether the efficiency of the estimator can be improved without dramatically increasing the computational burden. The efficiency of the Continuous ECF estimator depends on the number of dimensions of the joint unconditional characteristic function which is used for its construction. Theoretically, the more dimensions there are, the more efficient is the estimation procedure. In practice, however, this relationship is not so straightforward due to the increasing computational difficulties. The second chapter, for example, in addition to the choice of the jump process, discusses the possibility of using the marginal, i.e. one-dimensional, unconditional characteristic function in the estimation instead of the joint, bi-dimensional, unconditional characteristic function. As result, the preference for one or the other depends on the model to be estimated. Thus, the computational effort can be reduced in some cases without affecting the efficiency of the estimator. The improvement of the estimator s efficiency by increasing its dimensionality faces more difficulties. The third chapter of this thesis, in addition to what was discussed above, compares the performance of the estimators with bi- and three-dimensional unconditional characteristic functions on the simulated data. It shows that the theoretical efficiency of the Continuous ECF estimator based on the three-dimensional unconditional characteristic function is not attainable in practice, at least for the moment, due to the limitations on the computer power and optimization toolboxes available to the general public. Thus, the Continuous ECF estimator based on the joint, bi-dimensional, unconditional characteristic function has all the reasons to exist and to be used for the estimation of parameters of the stochastic volatility jump-diffusion models.

Neuroendocrine, metabolic, and immune functions during the acute phase response of inflammatory stress in monosodium L-glutamate-damaged, hyperadipose male rat.

In rats, neonatal treatment with monosodium L-glutamate (MSG) induces several metabolic and neuroendocrine abnormalities, which result in hyperadiposity. No data exist, however, regarding neuroendocrine, immune and metabolic responses to acute endotoxemia in the MSG-damaged rat. We studied the consequences of MSG treatment during the acute phase response of inflammatory stress. Neonatal male rats were treated with MSG or vehicle (controls, CTR) and studied at age 90 days. Pituitary, adrenal, adipo-insular axis, immune, metabolic and gonadal functions were explored before and up to 5 h after single sub-lethal i.p. injection of bacterial lipopolysaccharide (LPS; 150 microg/kg). Our results showed that, during the acute phase response of inflammatory stress in MSG rats: (1) the corticotrope-adrenal, leptin, insulin and triglyceride responses were higher than in CTR rats, (2) pro-inflammatory (TNFalpha) cytokine response was impaired and anti-inflammatory (IL-10) cytokine response was normal, and (3) changes in peripheral estradiol and testosterone levels after LPS varied as in CTR rats. These data indicate that metabolic and neroendocrine-immune functions are altered in MSG-damaged rats. Our study also suggests that the enhanced corticotrope-corticoadrenal activity in MSG animals could be responsible, at least in part, for the immune and metabolic derangements characterizing hypothalamic obesity.

Nuclear receptor Rev-erb alpha (Nr1d1) functions in concert with Nr2e3 to regulate transcriptional networks in the retina.

The majority of diseases in the retina are caused by genetic mutations affecting the development and function of photoreceptor cells. The transcriptional networks directing these processes are regulated by genes such as nuclear hormone receptors. The nuclear hormone receptor gene Rev-erb alpha/Nr1d1 has been widely studied for its role in the circadian cycle and cell metabolism, however its role in the retina is unknown. In order to understand the role of Rev-erb alpha/Nr1d1 in the retina, we evaluated the effects of loss of Nr1d1 to the developing retina and its co-regulation with the photoreceptor-specific nuclear receptor gene Nr2e3 in the developing and mature retina. Knock-down of Nr1d1 expression in the developing retina results in pan-retinal spotting and reduced retinal function by electroretinogram. Our studies show that NR1D1 protein is co-expressed with NR2E3 in the outer neuroblastic layer of the developing mouse retina. In the adult retina, NR1D1 is expressed in the ganglion cell layer and is co-expressed with NR2E3 in the outer nuclear layer, within rods and cones. Several genes co-targeted by NR2E3 and NR1D1 were identified that include: Nr2c1, Recoverin, Rgr, Rarres2, Pde8a, and Nupr1. We examined the cyclic expression of Nr1d1 and Nr2e3 over a twenty-four hour period and observed that both nuclear receptors cycle in a similar manner. Taken together, these studies reveal a novel role for Nr1d1, in conjunction with its cofactor Nr2e3, in regulating transcriptional networks critical for photoreceptor development and function.

Identifying the neural correlates of executive functions in early cerebral microangiopathy: a combined VBM and DTI study.

Cerebral microangiopathy (CMA) has been associated with executive dysfunction and fronto-parietal neural network disruption. Advances in magnetic resonance imaging allow more detailed analyses of gray (e.g., voxel-based morphometry-VBM) and white matter (e.g., diffusion tensor imaging-DTI) than traditional visual rating scales. The current study investigated patients with early CMA and healthy control subjects with all three approaches. Neuropsychological assessment focused on executive functions, the cognitive domain most discussed in CMA. The DTI and age-related white matter changes rating scales revealed convergent results showing widespread white matter changes in early CMA. Correlations were found in frontal and parietal areas exclusively with speeded, but not with speed-corrected executive measures. The VBM analyses showed reduced gray matter in frontal areas. All three approaches confirmed the hypothesized fronto-parietal network disruption in early CMA. Innovative methods (DTI) converged with results from conventional methods (visual rating) while allowing greater spatial and tissue accuracy. They are thus valid additions to the analysis of neural correlates of cognitive dysfunction. We found a clear distinction between speeded and nonspeeded executive measures in relationship to imaging parameters. Cognitive slowing is related to disease severity in early CMA and therefore important for early diagnostics.

Peroxisomal beta-oxidation--a metabolic pathway with multiple functions.

Fatty acid degradation in most organisms occurs primarily via the beta-oxidation cycle. In mammals, beta-oxidation occurs in both mitochondria and peroxisomes, whereas plants and most fungi harbor the beta-oxidation cycle only in the peroxisomes. Although several of the enzymes participating in this pathway in both organelles are similar, some distinct physiological roles have been uncovered. Recent advances in the structural elucidation of numerous mammalian and yeast enzymes involved in beta-oxidation have shed light on the basis of the substrate specificity for several of them. Of particular interest is the structural organization and function of the type 1 and 2 multifunctional enzyme (MFE-1 and MFE-2), two enzymes evolutionarily distant yet catalyzing the same overall enzymatic reactions but via opposite stereochemistry. New data on the physiological roles of the various enzymes participating in beta-oxidation have been gathered through the analysis of knockout mutants in plants, yeast and animals, as well as by the use of polyhydroxyalkanoate synthesis from beta-oxidation intermediates as a tool to study carbon flux through the pathway. In plants, both forward and reverse genetics performed on the model plant Arabidopsis thaliana have revealed novel roles for beta-oxidation in the germination process that is independent of the generation of carbohydrates for growth, as well as in embryo and flower development, and the generation of the phytohormone indole-3-acetic acid and the signal molecule jasmonic acid.

Macrophages from Crohn's disease patients exhibit deficient pro-repair functions

BACKGROUND: We previously reported that myeloid cells can induce mucosal healing in a mouse model of acute colitis. Promotion of mucosal repair is becoming a major goal in the treatment of Crohn's disease. Our aim in this study is to investigate the pro-repair function of myeloid cells in healthy donor (HD) and Crohn's disease patients (CD). METHODS: Peripheral blood mononuclear cells (PBMC) from HD and CD patients were isolated from blood samples by Ficoll density gradient. Monocytic CD14+ cells were positively selected by Macs procedure and then differentiated ex-vivo into macrophages (Mφ). The repair function of PBMC, CD14+ monocytic cells and macrophages were evaluated in an in vitro wound healing assay. RESULTS: PBMC and CD14+ myeloid cells from HD and CD were not able to repair at any tested cell concentration. Remarkably, HD Mφ were able to induce wound healing only at high concentration (105 added Mφ), but, if activated with heat killed bacteria, they were able to repair even at very low concentration. On the contrary, not activated CD Mφ were not able to promote healing at any rate, but this function was restored upon activation. CONCLUSION: We showed that CD Mφ in their steady state, unlike HD Mφ, are defective in promoting wound healing. Our results are in keeping with the current theory of CD as an innate immunodeficiency. Defective Mφ may be responsible to the mucosal repair defects in CD patients and to the subsequent chronic activation of the adaptive immune response.

Is the coiled body involved in nucleolar functions?

Coiled bodies (CBs) are structural constituents observed in nuclei of most eukaryotic cells. They usually occur in the nucleoplasm as well as in contact with the nucleolar surface. In this work we studied the hepatocyte nuclei of hibernating dormice in order to investigate possible modifications of CBs along the seasonal cycle. CBs were abundant during hibernation and rapidly disappeared upon arousal from hibernation. Moreover, CBs were frequently found to be integrated into the nucleolar body. Immunocytochemical analyses showed that CBs contain nucleoplasmic as well as nucleolar RNA-processing factors, suggesting an "ambiguous" role for this organelle in the nuclear functions.

The neuropeptide Y Y1 receptor regulates leptin-mediated control of energy homeostasis and reproductive functions.

The orexigenic neurotransmitter neuropeptide Y (NPY) plays a central role in the hypothalamic control of food intake and energy balance. NPY also exerts an inhibition of the gonadotrope axis that could be important in the response to poor metabolic conditions. In contrast, leptin provides an anorexigenic signal to centrally control the body needs in energy. Moreover, leptin contributes to preserve adequate reproductive functions by stimulating the activity of the gonadotrope axis. It is of interest that hypothalamic NPY represents a primary target of leptin actions. To evaluate the importance of the NPY Y1 and Y5 receptors in the downstream pathways modulated by leptin and controlling energy metabolism as well as the activity of the gonadotrope axis, we studied the effects of leptin administration on food intake and reproductive functions in mice deficient for the expression of either the Y1 or the Y5 receptor. Furthermore, the role of the Y1 receptor in leptin resistance was determined in leptin-deficient ob/ob mice bearing a null mutation in the NPY Y1 locus. Results point to a crucial role for the NPY Y1 receptor in mediating the NPY pathways situated downstream of leptin actions and controlling food intake, the onset of puberty, and the maintenance of reproductive functions.

Post-translational modifications regulate distinct functions of CARMA1 and BCL10.

Activation of the transcription factor nuclear factor (NF)-kappaB is essential for the normal functioning of the immune system. Deregulated NF-kappaB signalling in lymphocytes can lead to immunodeficiency, but also to autoimmunity or lymphomas. Many of the signalling components controlling NF-kappaB activation in lymphocytes are now known, but it is less clear how distinct molecular components of this pathway are regulated. Here, we summarize recent findings on post-translational modifications of intracellular components of this pathway. Phosphorylation of the CARMA1 and BCL10 proteins and ubiquitylation of BCL10 affect the formation and stability of the CARMA1-BCL10-MALT1 (CBM) complex, and also control negative feedback regulation of the NF-kappaB signalling pathway. Moreover, the study of BCL10 phosphorylation isoforms has revealed a new mechanism controlling BCL10 nuclear translocation and an unexpected role for BCL10 in the regulation of the actin cytoskeleton.

Notch1 functions as a tumor suppressor in mouse skin.

Notch proteins are important in binary cell-fate decisions and inhibiting differentiation in many developmental systems, and aberrant Notch signaling is associated with tumorigenesis. The role of Notch signaling in mammalian skin is less well characterized and is mainly based on in vitro studies, which suggest that Notch signaling induces differentiation in mammalian skin. Conventional gene targeting is not applicable to establishing the role of Notch receptors or ligands in the skin because Notch1-/- embryos die during gestation. Therefore, we used a tissue-specific inducible gene-targeting approach to study the physiological role of the Notch1 receptor in the mouse epidermis and the corneal epithelium of adult mice. Unexpectedly, ablation of Notch1 results in epidermal and corneal hyperplasia followed by the development of skin tumors and facilitated chemical-induced skin carcinogenesis. Notch1 deficiency in skin and in primary keratinocytes results in increased and sustained expression of Gli2, causing the development of basal-cell carcinoma-like tumors. Furthermore, Notch1 inactivation in the epidermis results in derepressed beta-catenin signaling in cells that should normally undergo differentiation. Enhanced beta-catenin signaling can be reversed by re-introduction of a dominant active form of the Notch1 receptor. This leads to a reduction in the signaling-competent pool of beta-catenin, indicating that Notch1 can inhibit beta-catenin-mediated signaling. Our results indicate that Notch1 functions as a tumor-suppressor gene in mammalian skin.

Dynamical modeling and analysis of large cellular regulatory networks.

The dynamical analysis of large biological regulatory networks requires the development of scalable methods for mathematical modeling. Following the approach initially introduced by Thomas, we formalize the interactions between the components of a network in terms of discrete variables, functions, and parameters. Model simulations result in directed graphs, called state transition graphs. We are particularly interested in reachability properties and asymptotic behaviors, which correspond to terminal strongly connected components (or "attractors") in the state transition graph. A well-known problem is the exponential increase of the size of state transition graphs with the number of network components, in particular when using the biologically realistic asynchronous updating assumption. To address this problem, we have developed several complementary methods enabling the analysis of the behavior of large and complex logical models: (i) the definition of transition priority classes to simplify the dynamics; (ii) a model reduction method preserving essential dynamical properties, (iii) a novel algorithm to compact state transition graphs and directly generate compressed representations, emphasizing relevant transient and asymptotic dynamical properties. The power of an approach combining these different methods is demonstrated by applying them to a recent multilevel logical model for the network controlling CD4+ T helper cell response to antigen presentation and to a dozen cytokines. This model accounts for the differentiation of canonical Th1 and Th2 lymphocytes, as well as of inflammatory Th17 and regulatory T cells, along with many hybrid subtypes. All these methods have been implemented into the software GINsim, which enables the definition, the analysis, and the simulation of logical regulatory graphs.

Peroxisome proliferator-activated receptors: insight into multiple cellular functions.

Peroxisome proliferator-activated receptors, PPARs, (NR1C) are nuclear hormone receptors implicated in energy homeostasis. Upon activation, these ligand-inducible transcription factors stimulate gene expression by binding to the promoter of target genes. The different structural domains of PPARs are presented in terms of activation mechanisms, namely ligand binding, phosphorylation, and cofactor interaction. The specificity of ligands, such as fatty acids, eicosanoids, fibrates and thiazolidinediones (TZD), is described for each of the three PPAR isotypes, alpha (NR1C1), beta (NR1C2) and gamma (NR1C3), so as the differential tissue distribution of these isotypes. Finally, general and specific functions of the PPAR isotypes are discussed, namely their implication in the control of inflammatory responses, cell proliferation and differentiation, the roles of PPARalpha in fatty acid catabolism and of PPARgamma in adipogenesis.

The contribution of aging to the understanding of the dimensionality of executive functions.

It has been reported in the literature that executive functions may be fractioned into updating, shifting, and inhibition. The present study aimed to explore whether these executive sub-components can be identified in a more age-heterogeneous sample and see if they are prone to an age-related decline. We tested the performances of 81 individuals aged from 18 to 88 years old in each executive sub-component, working memory, fluid intelligence and processing speed. Correlation analysis revealed only a slight positive relationship between the two updating measures. A linear decrement with age was observed only for two complex executive tests. Tasks indexing working memory, processing speed and fluid intelligence showed a stronger linear decline with age than executive tasks. In conclusion, our results did not replicate the executive structure known from the literature, and revealed that decrement in executive function is not an unavoidable concomitant of aging but rather concerns specific executive tasks.

Theory of mind tasks and executive functions: A systematic review of group studies in neurology.

A growing number of studies have been addressing the relationship between theory of mind (TOM) and executive functions (EF) in patients with acquired neurological pathology. In order to provide a global overview on the main findings, we conducted a systematic review on group studies where we aimed to (1) evaluate the patterns of impaired and preserved abilities of both TOM and EF in groups of patients with acquired neurological pathology and (2) investigate the existence of particular relations between different EF domains and TOM tasks. The search was conducted in Pubmed/Medline. A total of 24 articles met the inclusion criteria. We considered for analysis classical clinically accepted TOM tasks (first- and second-order false belief stories, the Faux Pas test, Happe's stories, the Mind in the Eyes task, and Cartoon's tasks) and EF domains (updating, shifting, inhibition, and access). The review suggests that (1) EF and TOM appear tightly associated. However, the few dissociations observed suggest they cannot be reduced to a single function; (2) no executive subprocess could be specifically associated with TOM performances; (3) the first-order false belief task and the Happe's story task seem to be less sensitive to neurological pathologies and less associated to EF. Even though the analysis of the reviewed studies demonstrates a close relationship between TOM and EF in patients with acquired neurological pathology, the nature of this relationship must be further investigated. Studies investigating ecological consequences of TOM and EF deficits, and intervention researches may bring further contributions to this question.

Divergent functions of three Candida albicans zinc-cluster transcription factors (CTA4, ASG1 and CTF1) complementing pleiotropic drug resistance in Saccharomyces cerevisiae.

One of the mediators of pleiotropic drug resistance in Saccharomyces cerevisiae is the ABC-transporter gene PDR5. This gene is regulated by at least two transcription factors with Zn(2)-Cys(6) finger DNA-binding motifs, Pdr1p and Pdr3p. In this work, we searched for functional homologues of these transcription factors in Candida albicans. A C. albicans gene library was screened in a S. cerevisiae mutant lacking PDR1 and PDR3 and clones resistant to azole antifungals were isolated. From these clones, three genes responsible for azole resistance were identified. These genes (CTA4, ASG1 and CTF1) encode proteins with Zn(2)-Cys(6)-type zinc finger motifs in their N-terminal domains. The C. albicans genes expressed in S. cerevisiae could activate the transcription of a PDR5-lacZ reporter system and this reporter activity was PDRE-dependent. They could also confer resistance to azoles in a S. cerevisiae strain lacking PDR1, PDR3 and PDR5, suggesting that CTA4-, ASG1- and CTF1-dependent azole resistance can be caused by genes other than PDR5 in S. cerevisiae. Deletion of CTA4, ASG1 and CTF1 in C. albicans had no effect on fluconazole susceptibility and did not alter the expression of the ABC-transporter genes CDR1 and CDR2 or the major facilitator gene MDR1, which encode multidrug transporters known as mediators of azole resistance in C. albicans. However, additional phenotypic screening tests on the C. albicans mutants revealed that the presence of ASG1 was necessary to sustain growth on non-fermentative carbon sources (sodium acetate, acetic acid, ethanol). In conclusion, C. albicans possesses functional homologues of the S. cerevisiae Pdr1p and Pdr3p transcription factors; however, their properties in C. albicans have been rewired to other functions.