Neural networks in financial engineering: a study in methodology.

Neural networks have shown considerable successes in modeling financial data series. However, a major weakness of neural modeling is the lack of established procedures for performing tests for misspecified models, and tests of statistical significance for the various parameters that have been estimated. This is a serious disadvantage in applications where there is a strong culture for testing not only the predictive power of a model or the sensitivity of the dependent variable to changes in the inputs but also the statistical significance of the finding at a specified level of confidence. Rarely is this more important than in the case of financial engineering, where the data generating processes are dominantly stochastic and only partially deterministic. Partly a tutorial, partly a review, this paper describes a collection of typical applications in options pricing, cointegration, the term structure of interest rates and models of investor behavior which highlight these weaknesses and propose and evaluate a number of solutions. We describe a number of alternative ways to deal with the problem of variable selection, show how to use model misspecification tests, we deploy a novel way based on cointegration to deal with the problem of nonstationarity, and generally describe approaches to predictive neural modeling which are more in tune with the requirements for modeling financial data series.

Carbohydrate metabolism and the hemodynamic response to shock.

To investigate the temporal relationship of changes in carbohydrate metabolism to changes in the hemodynamic stability of the dog in protracted hemorrhagic shock, 30 animals were studied. Blood pressure was maintained at 60 mm Hg for 12 hr during which hemodynamic and metabolic parameters were studied. In early shock cardiac output was decreased and peripheral resistance increased. After 2 hr cardiac output began to increase and peripheral resistance began a progressive decline despite the continuing hypotensive state. Hemodynamic decompensation was essentially complete at 5 hr. There was early and marked mobilization of carbohydrate stores. Muscle glycogen was rapidly mobilized over a 5-hr period. Serum glucose and blood lactate levels rose and remained elevated for 8 hr. Amino acid degradation remained at high levels throughout the experimental period. Hemodynamic decompensation began well before significant depletion of carbohydrate stores and was complete well before the relative exhaustion of the available reserves.

The isoinhibitors of chymotrypsin/elastase from Ascaris lumbricoides: the reactive site.

Five isoinhibitors of chymotrypsin/elastase present in aqueous extracts of Ascaris were isolated. The reactive site in each isoinhibitor, the peptide bond that during encounter is positioned over the catalytic site in chymotrypsin, is Leu-Met. This bond was hydrolyzed by incubating intact isoinhibitors with 5-25 mol% chymotrypsin at pH 3.2 for 4-6 days (isoinhibitor 1) or 2.5-5 weeks (isoinhibitors 2-5). The reaction under these conditions did not proceed beyond 60% modified isoinhibitor (peptide bond hydrolyzed) and 40% intact inhibitor. The Leu-Met bond, hydrolyzed in modified isoinhibitor, can be resynthesized at pH 7.6 by incubating modified inhibitor with a stoichiometric amount of chymotrypsin bound to Sepharose CL-4B and then dissociating the complex in a kinetically controlled fashion with 5% trichloroacetic acid. The product, intact inhibitor, was obtained in greater than 80% yield. The site in the isoinhibitor that is positioned over the catalytic site in elastase during encounter is the same as for encounter with chymotrypsin. The Leu-Met bond hydrolyzed during encounter with elastase can be resynthesized by chymotrypsin. Chymotrypsin and elastase bind to the inhibitor at the same site.

The isoinhibitors of chymotrypsin/elastase from Ascaris lumbricoides: isolation by affinity chromatography and association with the enzymes.

Five isoinhibitors, proteins that inactivate chymotrypsin and elastase, were isolated from aqueous extracts of the intestinal parasite Ascaris lumbricoides var. suum by affinity chromatography. They were named in the order that they eluted from a CM-Sephadex C-25 column at pH 8.6 using a salt gradient. Isoinhibitor 1, first reported in this paper, is anionic on polyacrylamide gel electrophoresis at pH 9.3. The other four isoinhibitors are cationic on electrophoresis at pH 9.3, separable from each other, and identical with those reported previously [R.J. Peanasky and G. M. Abu-Erreish (1971) in Proceedings International Research Conference on Proteinase Inhibitors (Fritz, H., and Tschesche, H., eds.), pp. 281-293, de Gruyter, New York]. Amino acid compositions show differences between the isoinhibitors. Antibody to isoinhibitor 1 reacts with its self-antigen only. Antibody to isoinhibitor 5 reacts with isoinhibitors 2-5 but not with isoinhibitor 1. Association equilibrium constants show that each of the isoinhibitors interacts most avidly with alpha-chymotrypsin. For isoinhibitor 1, the K alpha for alpha-chymotrypsin was 2.6 X 10(11) M-1, for porcine elastase I 1.6 X 10(10) M-1, and for Subtilisin Carlsberg 3.3 X 10(7) M-1. For isoinhibitors 2-5, the K alpha ranges were 7.1 X 10(10) to 1.3 X 10(11) M-1 for alpha-chymotrypsin, 1.0 X 10(9) to 5.6 X 10(9) M-1 for porcine elastase I, and 6.0 X 10(8) to 1.3 X 10(9) M-1 for subtilisin Carlsberg. Because of the strong affinity of these inhibitors for alpha-chymotrypsin and elastase, two proteins in the normal environment of the nematode, the name isoinhibitors of chymotrypsin/elastase is suggested for these proteins.