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Yi-Cheng Zhang

Publications and source records attributed to Yi-Cheng Zhang.

123 records · Page 7Linked to original sources
arXiv1999

1/f Noise and Long Configuration Memory in Bak-Tang-Wiesenfeld Models on Narrow Stripes

We report our findings of an 1/f power spectrum for the total amount of sand in directed and undirected Bak-Tang-Wiesenfeld models confined on narrow stripes and driven locally. The underlying mechanism for the 1/f noise in these systems is an exponentially long configuration memory giving rise to a very broad distribution of time scales. Both models are solved analytically with the help of an operator algebra to explicitly show the appearance of the long configuration memory.

cond-mat.stat-mech↗
arXiv1999

Toward a Theory of Marginally Efficient Markets

Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it favorable games}, in the sense that there is a small probabilistic edge that smart speculators can exploit. We propose to identify this probability using conditional entropy concept. A perfect random walk has this entropy maximized, and departure from the maximal value represents a price history's predictability. We propose that market participants should be divided into two categories: producers and speculators. The former provides the negative entropy into the price, upon which the latter feed. We show that the residual negative entropy can never be arbitraged away: infinite arbitrage capital is needed to make the price a perfect random walk.

cond-mat.stat-mech↗
arXiv1998

Probability distribution of drawdowns in risky investments

We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a general power law. In particular, if the risk exposure is Kelly-optimal, the exponent of this power law has the borderline value of 2, i.e. the average drawdown is just about to diverge

cond-mat.stat-mech↗
arXiv1998

Critical exponents of the anisotropic Bak-Sneppen model

We analyze the behavior of spatially anisotropic Bak-Sneppen model. We demonstrate that a nontrivial relation between critical exponents tau and mu=d/D, recently derived for the isotropic Bak-Sneppen model, holds for its anisotropic version as well. For one-dimensional anisotropic Bak-Sneppen model we derive a novel exact equation for the distribution of avalanche spatial sizes, and extract the value gamma=2 for one of the critical exponents of the model. Other critical exponents are then determined from previously known exponent relations. Our results are in excellent agreement with Monte Carlo simulations of the model as well as with direct numerical integration of the new equation.

cond-mat.stat-mech↗
arXiv1998

On the Minority Game : Analytical and Numerical Studies

We investigate further several properties of the minority game we have recently introduced. We explain the origin of the phase transition and give an analytical expression of $σ^2/N$ in the $N\ll2^M$ region. The ability of the players to learn a given payoff is also analyzed, and we show that the Darwinian evolution process tends to a self-organized state, in particular, the life-time distribution is a power-law with exponent -2. Furthermore, we study the influence of identical players on their gain and on the system's performance. Finally, we show that large brains always take advantage of small brains.

cond-mat.stat-mech↗
arXiv1998

Modeling Market Mechanism with Evolutionary Games

This is an essay solicited by Europhysics News, published in its March/April 1998 issue with slight modifications. We outline some highlights of the econophysics models, especially the so-called Minority model of competition and evolution. Even without the usual math, this essay offers an analytical solution to the Minority model, revealing some key features of the solution.

cond-mat.soft↗
arXiv1998

Directed Polymers on a Factorized Disorder Landscape

We study the Directed Polymer model subject to a particular form of disorder, $η(x,t)=η_X(x) η_T(t)$, recently proposed in biological applications. We find that two new universality classes arise, depending on the the lattice geometry. Using an intermediate model linking the two different orientations continuously, we find that there is a phase transition separating two distinct scaling phases. For both phases we get a reasonable understanding of the nature and values of the exponents, corroborated with numerical results.

cond-mat.stat-mech↗
arXiv1998

Stochastic Dynamics in Game Theory

We introduce a simple stochastic dynamics for game theory. It assumes ``local'' rationality in the sense that any player climbs the gradient of his utility function in the presence of a stochastic force which represents deviation from rationality in the form of a ``heat bath''. We focus on particular games of a large number of players with a global interaction which is typical of economic systems. The stable states of this dynamics coincide with the Nash equilibria of game theory. We study the gaussian fluctuations around these equilibria and establish that fluctuations around competitive equilibria increase with the number of players. In other words, competitive equilibria are characterized by very broad and uneven distributions among players. We also develop a small noise expansion which allows to compute a ``free energy'' functional. In particular we discuss the problem of equilibrium selection when more than one equilibrium state is present.

cond-mat.stat-mech↗
arXiv1998

Interacting Individuals Leading to Zipf's Law

We present a general approach to explain the Zipf's law of city distribution. If the simplest interaction (pairwise) is assumed, individuals tend to form cities in agreement with the well-known statistics

cond-mat.stat-mech↗
arXiv1998

Optimal Investment Strategy for Risky Assets

We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of capital that an investor should keep in risky assets as well as weights of different assets in an optimal portfolio. In this approach both average return and volatility of an asset are relevant indicators determining its optimal weight. Our results are particularly relevant for very risky assets when traditional continuous-time Gaussian portfolio theories are no longer applicable.

cond-mat.stat-mech↗
arXiv1998

Dynamical Optimization Theory of a Diversified Portfolio

We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random walk with identical drift and dispersion. The rules of our model naturally give rise to power law tails in the distribution of capital fractions invested in different stocks. The exponent of this scale free distribution is calculated in both discrete and continuous time formalism. It is demonstrated that the dynamical redistribution strategy results in a larger typical growth rate of the capital than a static ``buy-and-hold'' strategy. In the large N limit the typical growth rate is shown to asymptotically approach that of the expectation value of the stock price. The finite dimensional variant of the model is shown to describe the partition function of directed polymers in random media.

cond-mat.stat-mech↗
arXiv1997

Emergence of Cooperation and Organization in an Evolutionary Game

A binary game is introduced and analysed. N players have to choose one of the two sides independently and those on the minority side win. Players uses a finite set of ad hoc strategies to make their decision, based on the past record. The analysing power is limited and can adapt when necessary. Interesting cooperation and competition pattern of the society seem to arise and to be responsive to the payoff function.

adap-org↗
arXiv1996

Ground State Wave Function of the Schrödinger Equation in a Time-Periodic Potential

Using a generalized transfer matrix method we exactly solve the Schrödinger equation in a time periodic potential, with discretized Euclidean space-time. The ground state wave function propagates in space and time with an oscillating soliton-like wave packet and the wave front is wedge shaped. In a statistical mechanics framework our solution represents the partition sum of a directed polymer subjected to a potential layer with alternating (attractive and repulsive) pinning centers.

cond-mat↗
arXiv1996

Self-Organized Critical Directed Percolation

We introduce and study a dynamic transport model exhibiting Self-Organized Criticality. The novel concepts of our model are the probabilistic propagation of activity and unbiased random repartition of energy among the active site and its nearest neighbors. For space dimensionality $d\geq 2$ we argue that the model is related to $d+1$ dimensional directed percolation, with time interpreted as the preferred direction.

adap-org↗