Modelling fluctuations of financial time series: from cascade process to stochastic volatility model

In this paper, we provide a simple, “generic” interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as recently observed in reference [23], naturally emerge. We then propose a simple solvable “stochastic volatility” model for return fluctuations. This model is able to reproduce most of recent empirical findings concerning financial time series: no correlation between price variations, long-range volatility correlations and multifractal statistics. Moreover, its extension to a multivariate context, in order to model portfolio behavior, is very natural. Comparisons to real data and other models proposed elsewhere are provided. Received 22 May 2000     

A geometric generalization of field theory to manifolds of arbitrary dimension

We introduce a generalization of the O(N) field theory to N-colored membranes of arbitrary inner dimension D. The O(N) model is obtained for , while leads to self-avoiding tethered membranes (as the O(N) model reduces to self-avoiding polymers). The model is studied perturbatively by a 1-loop renormalization group analysis, and exactly as .Freedom to choose the expansion point D, leads to precise estimates of critical exponents of the O(N) model. Insights gained from this generalization include a conjecture on the nature of droplets dominating the 3d-Ising model at criticality; and the fixed point governing the random bond Ising model. Received: 15 October 1998 / Accepted: 4 November 1998     

Magnetic fluids in an external field

Within mean field approximation we investigate the phase diagrams of magnetic fluids in presence of a magnetic field. In a finite field the magnetic phase transition is absent, but instead a line of first order liquid-liquid transitions ending in a critical point occurs for a magnetic interaction, which is sufficiently strong. Varying the magnetic field these critical points extend from the tricritical point at H=0 to a critical endpoint. For a fluid with Ising spins we calculate the critical lines and several tricritical exponents analytically. For Heisenberg fluids we obtain the phase diagrams from a numerical solution of the mean field equations of state. Received 20 March 1998     

Density matrix renormalization group and reaction-diffusion processes

The density matrix renormalization group ( DMRG) is applied to some one-dimensional reaction-diffusion models in the vicinity of and at their critical point. The stochastic time evolution for these models is given in terms of a non-symmetric “quantum Hamiltonian”, which is diagonalized using the DMRG method for open chains of moderate lengths (up to about 60 sites). The numerical diagonalization methods for non-symmetric matrices are reviewed. Different choices for an appropriate density matrix in the non-symmetric DMRG are discussed. Accurate estimates of the steady-state critical points and exponents can then be found from finite-size scaling through standard finite-lattice extrapolation methods. This is exemplified by studying the leading relaxation time and the density profiles of diffusion-annihilation and of a branching-fusing model in the directed percolation universality class. Received 2 February 1999     

Baryons and dual unitarization

Processes involving baryons are discussed in the scheme of dual unitarization. In particular, the topological expansion is generalized to any hadronic S-matrix elements involving baryons and/or mesons. Our expansion is based on a model for the baryon propagator, which is a set of three planar Feynman diagrams joined at a junction line. The resulting expansion is a double expansion in 1/N (N= the number of quark flavours) and in the number of baryon loops. Based on this, several new observations are made in phenomenological problems, and a unifying point of view is stressed. The scheme is evidently crossing invariant, and unitarity constraints are imposed order by order in 1/N and in the baryon loop number.     

Lévy-flight spreading of epidemic processes leading to percolating clusters

We consider two stochastic processes, the Gribov process and the general epidemic process, that describe the spreading of an infectious disease. In contrast to the usually assumed case of short-range infections that lead, at the critical point, to directed and isotropic percolation respectively, we consider long-range infections with a probability distribution decaying in d dimensions with the distance as . By means of Wilson's momentum shell renormalization-group recursion relations, the critical exponents characterizing the growing fractal clusters are calculated to first order in an -expansion. It is shown that the long-range critical behavior changes continuously to its short-range counterpart for a decay exponent of the infection . Received: 17 July 1998 / Revised: 20 July 1998 / Accepted: 28 July 1998     

Disorder driven roughening transitions of elastic manifolds and periodic elastic media

The simultaneous effect of both disorder and crystal-lattice pinning on the equilibrium behavior of oriented elastic objects is studied using scaling arguments and a functional renormalization group technique. Our analysis applies to elastic manifolds, e.g., interfaces, as well as to periodic elastic media, e.g., charge-density waves or flux-line lattices. The competition between both pinning mechanisms leads to a continuous, disorder driven roughening transition between a flat state where the mean relative displacement saturates on large scales and a rough state with diverging relative displacement. The transition can be approached by changing the impurity concentration or, indirectly, by tuning the temperature since the pinning strengths of the random and crystal potential have in general a different temperature dependence. For D dimensional elastic manifolds interacting with either random-field or random-bond disorder a transition exists for 2<D<4, and the critical exponents are obtained to lowest order in . At the transition, the manifolds show a superuniversal logarithmic roughness. Dipolar interactions render lattice effects relevant also in the physical case of D=2. For periodic elastic media, a roughening transition exists only if the ratio p of the periodicities of the medium and the crystal lattice exceeds the critical value . For p<p _c the medium is always flat. Critical exponents are calculated in a double expansion in and and fulfill the scaling relations of random field models. Received 28 August 1998     

Mixed spin transverse Ising model with longitudinal random crystal field interactions

The effect of a longitudinal random crystal field interaction on the phase diagrams of the mixed spin transverse Ising model consisting of spin-1/2 and spin-1 is investigated within the finite cluster approximation based on a single-site cluster theory. In order to expand a cluster identity of spin-1, we transform the spin-1 to spin-1/2 representation containing Pauli operators. We derive the state equations applicable to structures with arbitrary coordination number N. The phase diagrams obtained in the case of a honeycomb lattice (N=3) and a simple-cubic lattice (N=6), are qualitatively different and examined in detail. We find that both systems exhibit a variety of interesting features resulting from the fluctuation of the crystal field interactions. Received: 13 February 1998 / Accepted: 17 March 1998     

Duality of Orthogonal and Symplectic Matrix Integrals and Quaternionic Feynman Graphs

We present an asymptotic expansion for quaternionic self-adjoint matrix integrals. The Feynman diagrams appearing in the expansion are ordinary ribbon graphs and their non-orientable counterparts. We show that the 2N×2N Gaussian Orthogonal Ensemble (GOE) and N×N Gaussian Symplectic Ensemble (GSE) have exactly the same expansion term by term, except that the contributions from graphs on a non-orientable surface with odd Euler characteristic carry the opposite sign. As an application, we give a new topological proof of the known duality for correlations of characteristic polynomials, demonstrating that this duality is equivalent to Poincaré duality of graphs drawn on a compact surface. Another consequence of our graphical expansion formula is a simple and simultaneous (re)derivation of the Central Limit Theorem for GOE, GUE (Gaussian Unitary Ensemble) and GSE: The three cases have exactly the same graphical limiting formula except for an overall constant that represents the type of the ensemble.Research supported by NSF Grant DMS-9971371 and the University of California, Davis.Research supported by the University of California, Davis.     

Critical behavior of a three-state Potts model on a Voronoi lattice

We use the single-histogram technique to study the critical behavior of the three-state Potts model on a (random) Voronoi-Delaunay lattice with size ranging from 250 to 8 000 sites. We consider the effect of an exponential decay of the interactions with the distance, , with a>0, and observe that this system seems to have critical exponents and which are different from the respective exponents of the three-state Potts model on a regular square lattice. However, the ratio remains essentially the same. We find numerical evidences (although not conclusive, due to the small range of system size) that the specific heat on this random system behaves as a power-law for a=0 and as a logarithmic divergence for a=0.5 and a=1.0 Received 5 April 2000     

A lattice gas coupled to two thermal reservoirs: Monte Carlo and field theoretic studies

We investigate the collective behavior of an Ising lattice gas, driven to non-equilibrium steady states by being coupled to two thermal baths. Monte Carlo methods are applied to a two-dimensional system in which one of the baths is fixed at infinite temperature. Both generic long range correlations in the disordered state and critical properties near the second order transition are measured. Anisotropic scaling, a key feature near criticality, is used to extract and some critical exponents. On the theoretical front, a continuum theory, in the spirit of Landau-Ginzburg, is presented. Being a renormalizable theory, its predictions can be computed by standard methods of -expansions and found to be consistent with simulation data. In particular, the critical behavior of this system belongs to a universality class which is quite different from the uniformly driven Ising model. Received 4 October 2000     

Log-periodic oscillations for biased diffusion of a polymer chain in a porous medium

A coarse-grained off-lattice bead-spring model is used to reveal the complex dynamics of a polymer chain in a quenched porous medium in the presence of an external field B. The behavior of the mean square displacement (MSD) of the center chain bead and that of the center of mass of the chain as a function of time is studied at different values of the barrier concentration C, the field strength B and the chain length N. In a field, important information on the way in which chains move between obstacles and overcome them is gained from the MSD vs. time analysis in the directions parallel and perpendicular to the flow. Instead of a steady approach to uniform drift-like motion at low C, for sufficiently strong field B we observe logarithmic oscillations in the effective exponents describing the time dependence of the MSD along and perpendicular to field. A common nature of this phenomenon with oscillatory behavior, observed earlier for biased diffusion of tracers on random lattices, is suggested. Received 7 August 1998     

Mixed spin-1 and spin-3/2 Ising system with two alternative layers of a honeycomb lattice within the effective-field theory

An effective-field theory with correlations is developed for a mixed spin-1 and spin-3/2 Ising system with two alternative layers of a honeycomb lattice. Spin-1 atoms and spin-3/2 atoms are distributed in alternative layers of a honeycomb lattice. We consider that the nearest-neighbor spins of each layer are coupled ferromagnetically and the interaction between the vertically aligned spins and adjacent spins are coupled either ferromagnetically or antiferromagnetically depending on the sign of the bilinear exchange interactions. We investigate the temperature dependence of the total magnetization to find the compensation points and to determine the type of compensation behavior. We present the phase diagrams in different planes for h=0, and the phase diagrams contain the paramagnetic, nonmagnetic and ferrimagnetic phases. The system also presents a tricritical behavior besides multicritical point (A), isolated critical point (C) and double critical end point (B) depending on the interaction parameters.     

NO--CO--O2 Reaction on a Metal Catalytic Surface using Eley--Rideal Mechanism

Interactions among the reacting species NO, CO and O2 on metal catalytic surfaces are studied by means of Monte Carlo simulation using the Eley-Rideal （ER） mechanism. The study of this three-component system is important for understanding of the reaction kinetics by varying the relative ratios of the reactants. It is found that contrary to the conventional Langmuir-Hinshelwood （LFI） thermal mechanism in which two irreversible phase transitions are obtained between active states and poisoned states, a single phase transition is observed when the ER mechanism is combined with the LH mechanism. The phase diagrams of the surface coverage and the steady state production of CO2, N2 and N2O are evaluated as a function of the partial pressures of the reactants in the gas phase. The continuous production of CO2 starts as soon as the CO pressure is switched on and the second order phase transition at the first critical point is eliminated, which is in agreement with the experimental findings.     

An effective-field study of Ising metamagnet in an external field

The phase diagrams and magnetization curves of a two-sublattice Ising metamagnet at finite temperature with longitudinal crystal field H are investigated by the use of an effective-field theory (EFT) with correlations. In addition to the second-order transition lines, the first-order transition lines are also presented, since a method to calculate the Gibbs free energy numerically at finite temperature within EFT is found in this work. The results show that there is no fourth-order critical point or reentrant phenomenon in the phase diagrams given by using EFT as found by using mean-field theory (MFT).     

An order-by-order construction of low-temperature phase diagrams for classical lattice systems

An inductive algorithm is presented for the construction of phase diagrams by means of the low-temperature expansion technique. First the phase diagram is studied in the set of formal series. In each step, properties of this phase diagram are related to extremal elements of some family of convex sets. Approximations of the phase diagram in orderN are obtained by truncating all formal series at theNth term.This paper was presented at the Trebon, Czechoslovakia, Symposium September 1–6, 1986.     

Superdiffusivity of Two Dimensional Lattice Gas Models

It was proved [Navier–Stokes Equations for Stochastic Particle System on the Lattice. Comm. Math. Phys. (1996) 182, 395; Lattice gases, large deviations, and the incompressible Navier–Stokes equations. Ann. Math. (1998) 148, 51] that stochastic lattice gas dynamics converge to the Navier–Stokes equations in dimension d=3 in the incompressible limits. In particular, the viscosity is finite. We proved that, on the other hand, the viscosity for a two dimensional lattice gas model diverges faster than (log t)^1/2. Our argument indicates that the correct divergence rate is (log t)^1/2. This problem is closely related to the logarithmic correction of the time decay rate for the velocity auto-correlation function of a tagged particle.     

Random-phase approximation for the grand-canonical potential of composite fermions in the half-filled lowest Landau level

We reconsider the theory of the half-filled lowest Landau level using the Chern-Simons formulation and study the grand-canonical potential in the random-phase approximation (RPA). Calculating the unperturbed response functions for current- and charge-density exactly, without any expansion with respect to frequency or wave vector, we find that the integral for the ground-state energy converges rapidly (algebraically) at large wave vectors k, but exhibits a logarithmic divergence at small k. This divergence originates in the k^-2 singularity of the Chern-Simons interaction and it is already present in lowest-order perturbation theory. A similar divergence appears in the chemical potential. Beyond the RPA, we identify diagrams for the grand-canonical potential (ladder-type, maximally crossed, or a combination of both) which diverge with powers of the logarithm. We expand our result for the RPA ground-state energy in the strength of the Coulomb interaction. The linear term is finite and its value compares well with numerical simulations of interacting electrons in the lowest Landau level. Received: 19 February 1998 / Revised: 25 March 1998 / Accepted: 17 April 1998     

Quasiclassical Hamiltonians for large-spin systems

We extend and apply a previously developed method for a semiclassical treatment of a system with large spin S. A multisite Heisenberg Hamiltonian is transformed into an effective classical Hamilton function which can be treated by standard methods for classical systems. Quantum effects enter in form of multispin interactions in the Hamilton function. The latter is written in the form of an expansion in powers of J/(TS), where J is the coupling constant. Main ingredients of our method are spin coherent states and cumulants. Rules and diagrams are derived for computing cumulants of groups of operators entering the Hamiltonian. The theory is illustrated by calculating the quantum corrections to the free energy of a Heisenberg chain which were previously computed by a Wigner-Kirkwood expansion. Received 5 May 1999 and received in final form 24 September 1999