Black-Scholes option valuation for scientific computing students

Mathematical finance forms a modern, attractive source of examples and case studies for classes in scientific computation. I will show here how the Nobel Prize winning Black-Scholes option valuation theory can be used to motivate exercises in Monte Carlo simulation, matrix computation and numerical methods for partial differential equations

Mathematical and computational modelling of post-transcriptional gene relation by micro-RNA

Mathematical models and computational simulations have proved valuable in many areas of cell biology, including gene regulatory networks. When properly calibrated against experimental data, kinetic models can be used to describe how the concentrations of key species evolve over time. A reliable model allows ‘what if’ scenarios to be investigated quantitatively in silico, and also provides a means to compare competing hypotheses about the underlying biological mechanisms at work. Moreover, models at different scales of resolution can be merged into a bigger picture ‘systems’ level description. In the case where gene regulation is post-transcriptionally affected by microRNAs, biological understanding and experimental techniques have only recently matured to the extent that we can postulate and test kinetic models. In this chapter, we summarize some recent work that takes the first steps towards realistic modelling, focusing on the contributions of the authors. Using a deterministic ordinary differential equation framework, we derive models from first principles and test them for consistency with recent experimental data, including microarray and mass spectrometry measurements. We first consider typical mis-expression experiments, where the microRNA level is instantaneously boosted or depleted and thereafter remains at a fixed level. We then move on to a more general setting where the microRNA is simply treated as another species in the reaction network, with microRNA-mRNA binding forming the basis for the post-transcriptional repression. We include some speculative comments about the potential for kinetic modelling to contribute to the more widespread sequence and network based approaches in the qualitative investigation of microRNA based gene regulation. We also consider what new combinations of experimental data will be needed in order to make sense of the increased systems-level complexity introduced by microRNAs

Chemical master versus chemical langevin for first-order reaction networks

Markov jump processes are widely used to model interacting species in circumstances where discreteness and stochasticity are relevant. Such models have been particularly successful in computational cell biology, and in this case, the interactions are typically rst-order. The Chemical Langevin Equation is a stochastic dierential equation that can be regarded as an approximation to the underlying jump process. In particular, the Chemical Langevin Equation allows simulations to be performed more eectively. In this work, we obtain expressions for the rst and second moments of the Chemical Langevin Equation for a generic rst-order reaction network. Moreover, we show that these moments exactly match those of the under-lying jump process. Hence, in terms of means, variances and correlations, the Chemical Langevin Equation is an excellent proxy for the Chemical Master Equation. Our work assumes that a unique solution exists for the Chemical Langevin Equation. We also show that the moment matching re- sult extends to the case where a gene regulation model of Raser and O'Shea (Science, 2004) is replaced by a hybrid model that mixes elements of the Master and Langevin equations. We nish with numerical experiments on a dimerization model that involves second order reactions, showing that the two regimes continue to give similar results

The sleekest link algorithm

How does Google decide which web sites are important? It uses an ingenious algorithm that exploits the structure of the web and is resistant to hacking. Here, we describe this PageRank algorithm, illustrate it by example, and show how it can be interpreted as a Jacobi iteration and a teleporting random walk. We also ask the algorithm to rank the undergraduate mathematics classes offered at the University of Strathclyde. PageRank draws upon ideas from linear algebra, graph theory and stochastic processes, and it throws up research-level challenges in scientific computing. It thus forms an exciting and modern application area that could brighten up many a mathematics class syllabus

Multi-level Monte Carlo for continuous time Markov chains, with applications in biochemical kinetics

We show how to extend a recently proposed multi-level Monte Carlo approach to the continuous time Markov chain setting, thereby greatly lowering the computational complexity needed to compute expected values of functions of the state of the system to a specified accuracy. The extension is non-trivial, exploiting a coupling of the requisite processes that is easy to simulate while providing a small variance for the estimator. Further, and in a stark departure from other implementations of multi-level Monte Carlo, we show how to produce an unbiased estimator that is significantly less computationally expensive than the usual unbiased estimator arising from exact algorithms in conjunction with crude Monte Carlo. We thereby dramatically improve, in a quantifiable manner, the basic computational complexity of current approaches that have many names and variants across the scientific literature, including the Bortz-Kalos-Lebowitz algorithm, discrete event simulation, dynamic Monte Carlo, kinetic Monte Carlo, the n-fold way, the next reaction method,the residence-time algorithm, the stochastic simulation algorithm, Gillespie's algorithm, and tau-leaping. The new algorithm applies generically, but we also give an example where the coupling idea alone, even without a multi-level discretization, can be used to improve efficiency by exploiting system structure. Stochastically modeled chemical reaction networks provide a very important application for this work. Hence, we use this context for our notation, terminology, natural scalings, and computational examples.Comment: Improved description of the constants in statement of Theorem

Almost sure and moment exponential stability in the numerical simulation of stochastic differential equations

Relatively little is known about the ability of numerical methods for stochastic differential equations (SDEs) to reproduce almost sure and small-moment stability. Here, we focus on these stability properties in the limit as the timestep tends to zero. Our analysis is motivated by an example of an exponentially almost surely stable nonlinear SDE for which the Euler-Maruyama (EM)method fails to reproduce this behavior for any nonzero timestep. We begin by showing that EM correctly reproduces almost sure and small-moment exponential stability for sufficiently small timesteps on scalar linear SDEs. We then generalize our results to multidimensional nonlinear SDEs. We show that when the SDE obeys a linear growth condition, EM recovers almost surely exponential stability very well. Under the less restrictive condition that the drift coefficient of the SDE obeys a one-sided Lipschitz condition, where EM may break down, we show that the backward Euler method maintains almost surely exponential stability

Diversity in Retirement Wealth Accumulation

Examines household wealth by source, such as Social Security, home equity, savings, and defined benefit pensions; how their savings build up with age; and how total wealth accumulations vary by income, education, and race/ethnicity. Explores implications