text:
# Tradable Schemes

## 1 Introduction

One of the most popular methods for pricing (exotic) derivative securities is to make use of finite difference schemes to solve the PDE associated with the pricing problem. In a world where prices are driven by Wiener processes such PDE’s are usually of generalized diffusion type

$$\left(_t+\alpha (x,t)+\beta (x,t)_x+\gamma (x,t)_x^2\right)V(x,t)=0$$

In such an equation the terms containing $`\alpha ,\beta `$ and $`\gamma `$ will be called the constant, drift and diffusion term respectively. In the traditional formulation of option pricing theory, the PDE to be solved generally contains not only diffusion terms but also non-trivial constant and drift terms. The most obvious example is of course the Black-Scholes PDE:

$$\left(_tr+rS_S+\frac{1}{2}\sigma ^2S^2_S^2\right)V(S,t)=0$$

It is well known that exactly the presence of drift terms in the PDE can lead to severe numerical problems, unless they are handled with much care.

In this article we present a new approach to the numerical valuation of derivative securities. The approach is based on our previous work \[HN99a, HN99b, HN00a\] where we introduced a new formalism for contingent claim pricing. The core of this formalism is the idea that problems should be formulated in terms of tradable objects only. (Note that we use a broad definition of the term tradable: every quantity that can be represented by a self-financing portfolio is considered to be a tradable). From a numerical point of view, the formalism has the distinct advantage that pricing PDE’s never contain drift nor constant terms. This makes it a very natural starting point for the construction of finite difference schemes for pricing derivative securities.

Our key idea is to require that a given set of solutions of the underlying PDE should also be an exact solution of the numerical scheme. We consider the case where there are two underlying tradables in the pricing problem, leading to a one dimensional PDE. It then turns out that we only need three exact solutions to fix a fully implicit (or explicit) scheme. By combining the fully implicit and fully explicit schemes into a Crank-Nicolson type scheme, we obtain a very powerful mixed scheme, still fitted to the exact solutions. Details on convergence and stability properties will be treated in future work.

So how do we fix the scheme? A very natural choice is to use the two tradables themselves as exact solutions of the PDE. So we need only one more non-trivial solution of the PDE. Such a solution is in general not too hard to obtain, as we show in this article. Note that instead of using exact solutions we could also use observed market prices to fix the scheme, generalizing in a natural way the concept of implied trees of Ref. \[DK94\]. The latter idea will be explored in future work.

In this article we present results on the performance of our scheme when applied to the pricing of a well known problematic case: the arithmetic Asian option, and furthermore results on the pricing of plain vanilla options on stocks paying cash dividends, which are related to arithmetic Asians by a symmetry operation (see Ref. \[HN00a\]). Note however that these applications only serve as an example of the power of the our scheme. The scheme itself can be used in a much broader class of pricing problems.

Let us recall some other approaches to the problem of pricing arithmetic Asians which can be found in the literature. To start with, there are the (semi-)analytical approaches. The first result in this direction was given in Ref. \[GY93\], who derived a closed form expression for the Laplace-transform of the price of a continuously sampled average price call. In our paper \[HN00a\] we provided a similar solution for the price of an arithmetic average strike put. Exploiting the various symmetries underlying the pricing of contingent claims, we furthermore showed that unseasoned arithmetic average price and strike options are closely related objects, which can be transformed into each other by a suitable substitution of parameters. However, to find actual prices, one needs to calculate an inverse Laplace transform. This turns out to be a hard problem, which requires a substantial amount of numerical work \[FMW98\] and makes the method less suitable for practical purposes.

For this reason, people usually revert to approximative or numerical methods instead. These methods can be roughly classified in three categories. The first category consists of analytical approximations. In Ref. \[TW91\] the first two moments of the distribution of the arithmetic average are fitted to a lognormal distribution. This leads to a Black-Scholes type pricing formula. Alternatively, in Refs. \[Cur94, RS95, Tho99\] quite accurate upper- and lower bounds on prices are derived. These methods can be very fast. Disadvantages are that they have a fixed accuracy and they can not easily be adapted to handle discretely sampled Asians and early exercise features.

The second category consists of methods which use the path integral or Feynman-Kac formulation of the problem as a starting point. A path integral can easily be evaluated using a Monte Carlo approach \[KV92\]. Just generate a large number of paths and take averages over the payoffs associated with every individual path. This method is versatile, simple to use and easy to implement. Main disadvantages are that convergence is slow, and the incorporation of early exercise features is notably hard. To speed up the calculation, one can make use of a proper control-variate to reduce the variance. In the case of arithmetic Asians, the obvious choice of a control variate is a geometric Asian for which closed form formulas do exist. Another disadvantage of Monte Carlo simulation is that paths are sampled discretely. Therefore the method inherently makes a discretization error when calculating continuously sampled Asians.

The third category consists of methods which numerically solve the PDE associated to the pricing problem. This approach is flexible and early exercise features can be incorporated in a straightforward manner. For arithmetic Asians there exist various forms of this PDE (e.g. Refs. \[Ing87, RS95, Zha99, HN99b\]). In principle all these forms can be related to each other by suitable changes of variables. However, to the best of our knowledge, our formulation of pricing theory in terms of tradables is the first and only one which leads in a natural and straightforward way to a PDE without drift and constant terms. Other approaches lead to PDE’s which are plagued by the presence of drift terms. The main problem associated to the appearance of a drift term is that for certain parameter ranges it tends to dominate the diffusion term. The PDE then becomes of hyperbolic type instead of parabolic type. If such a problem is attacked using standard techniques for solving parabolic (diffusion) equations, one finds spurious oscillations in the numerical solution. Similar problems are well known in the field of computational fluid dynamics, where they are known as boundary layer problems. It is this field in which methods were developed to circumvent the problem. One approach is to make use of so-called flux-delimiters. Their use in the pricing of arithmetic Asians was introduced in Ref. \[ZFV97\]. Unfortunately, their scheme is rather complicated to implement as it uses a non-uniform grid. Another approach is to use so-called fitted schemes \[Duf00, Mor96\]. Here the idea is to construct a finite difference scheme in such a way that stationary (time-independent) solutions of the underlying PDE are exact solutions of the numerical scheme.

Of course, boundary layer problems can be trivially avoided if drift terms are absent. The elegance of our idea lies in the fact that it is based on a formulation which accomplishes just this. This is a consequence of using the proper coordinates: tradables.

The outline of this article is as follows. Section 2 gives some background and motivation. In section 3 the construction of our finite difference scheme is described. In section 4 we apply the scheme to the PDE for Asian type options as well as vanilla options on stock paying cash dividend. Section 5 provides numerical results for both type of options. In section 6 we conclude and give an outlook.

## 2 Motivation

In previous work \[HN99a, HN99b, HN00a\], we have shown that in a market with two tradables, say $`S`$ and $`P`$, where price processes are driven by Brownian motions, the pricing PDE can be reduced to the form

$$\left(_\tau +\frac{1}{2}\sigma (x,t)^2x^2_x^2\right)V(x,\tau )=0$$

where $`P`$ was chosen as numeraire, $`\tau `$ is time to maturity, $`xS/P`$ and the price is $`PV(x,\tau )`$. Note the absence of a drift term. Due to this fact, the PDE has the trivial solutions $`x`$ and $`1`$, corresponding to the basic tradables $`S`$ and $`P`$ respectively. So the pricing problem is fixed by knowledge of $`\sigma (x,\tau )`$. Alternatively, suppose we know one more solution of this equation, one that has a non-vanishing second derivative with respect to $`x`$ (gamma), call it $`R(x,\tau )`$. Then we can write

$$\frac{1}{2}\sigma (x,\tau )^2x^2=\frac{_\tau R(x,\tau )}{_x^2R(x,\tau )}$$

In other words, the knowledge of the price of one sufficiently well-behaved derivative security also fixes the model. Let us consider as an example the Black-Scholes context. It is easy to construct a tradable with payoff $`x^2`$ at time $`\tau =0`$ (We will call it a quadratic tradable. It is a special case of a power tradable. See Ref. \[HN99b\]). It is given by

$$x^2e^{\sigma ^2\tau }$$

Plugging this into the formula we find

$$\sigma (x,t)=\sigma $$

as expected. Note that if we use observed option prices of, say, call options, taking derivatives w.r.t. expiration time and strike, we recover the concept of local volatility, the basic idea behind implied trees \[DK94\].

## 3 Finite differences

We can use the same line of thought to construct very efficient finite difference schemes. The idea is to construct a scheme in such a way that it has the underlying tradables as well as one given derived tradable as exact solutions. We will now show that these conditions uniquely fix a fully implicit scheme. Indeed, a fully implicit scheme is defined by the relations

$$a\delta _x^+\delta _x^{}V(x,\tau )+b\delta _x^0V(x,\tau )+cV(x,\tau )=d\delta _\tau ^{}V(x,\tau )$$

where

$$\delta _x^+\delta _x^{}V(x,\tau )\frac{V(x+\delta x,\tau )2V(x,\tau )+V(x\delta x,\tau )}{\delta x^2}$$

$$\delta _x^0V(x,\tau )\frac{V(x+\delta x,\tau )V(x\delta x,\tau )}{2\delta x}$$

$$\delta _\tau ^{}V(x,\tau )\frac{V(x,\tau )V(x,\tau \delta \tau )}{\delta \tau }$$

and $`a,b,c,d`$ are functions of $`x`$ and $`\tau `$. Now demanding that $`V=x`$ and $`V=1`$ are solutions of the scheme corresponds to setting $`b=0,c=0`$. Next, demanding that a given tradable $`R(x,\tau )`$ is also a solution leads to

$$a\delta _x^+\delta _x^{}R(x,\tau )=d\delta _\tau ^{}R(x,\tau )$$

Therefore, the fully implicit scheme, implied by the tradables is given by

$$\mathrm{\Theta }^{}(x,\tau )\delta _x^+\delta _x^{}V(x,\tau )=\mathrm{\Gamma }(x,\tau )\delta _\tau ^{}V(x,\tau )$$
(1)
where

$$\mathrm{\Theta }^{}(x,\tau )\delta _\tau ^{}R(x,\tau )$$

$$\mathrm{\Gamma }(x,\tau )\delta _x^+\delta _x^{}R(x,\tau )$$

A remarkably simple scheme, by virtue of the fact that in our formulation of the pricing problem there are no drift terms in the PDE. The absence of these drift terms also make the scheme unconditionally stable (see later article). Of course we can also derive an explicit scheme along the same lines. We find

$$\mathrm{\Theta }^+(x,\tau )\delta _x^+\delta _x^{}V(x,\tau )=\mathrm{\Gamma }(x,\tau )\delta _\tau ^+V(x,\tau )$$
(2)
where now

$$\delta _\tau ^+V(x,\tau )\frac{V(x,\tau +\delta \tau )V(x,\tau )}{\delta \tau }$$

$$\mathrm{\Theta }^+(x,\tau )\delta _\tau ^+R(x,\tau )$$

To further improve the accuracy of the scheme, we have combined the two schemes into a Crank-Nicolson type of scheme, i.e. we take the sum of Eqs. 1,2, taking care of a proper time shift in one of them.

## 4 Application to a specific PDE

A very interesting application of the scheme is in finding solutions of the PDE

$$(_\tau +\frac{1}{2}\sigma ^2(x\varphi (\tau ))^2_x^2)V(x,\tau )=0$$
(3)
where $`\varphi (\tau )`$ is a deterministic function. As was shown in our articles Ref. \[HN99b, HN00a\], this PDE can be used to price arithmetic Asian options as well as plain vanilla options on stocks paying cash dividends. Let us briefly recall how the PDE is related to such options. To price an arithmetic average strike put (unseasoned) with a payoff defined by

$$\left(_0^\tau w(u)\frac{S(u)}{P(u)}𝑑ukS\right)^+$$
(4)
we set

$$\varphi (\tau )=_0^\tau w(u)𝑑u$$

and then solve the PDE with boundary condition

$$V(x,0)=(xk)^+$$

The price then follows from

$$\text{Price}=SV(\varphi (\tau ),\tau )$$

The PDE can also be used to price average price options (using time reversal duality) and seasoned Asians in general. Details can be found in Ref. \[HN00a\]. To price a vanilla option (say a call) with strike $`K`$ on a stock paying a stream of cash dividends with density $`w(\tau )`$, expressed in units of the bond, we set

$$\varphi (\tau )=_0^\tau w(u)𝑑u$$

(notice the sign) and then solve the PDE with boundary condition

$$V(x,0)=(xK)^+$$

The price then follows from

$$\text{Price}=PV(S/P+\varphi (\tau ),\tau )$$

Note that if dividend payments are discrete (or for the Asian, sampling is discrete), $`w(\tau )`$ becomes a weighted sum of Dirac delta-functions, and $`\varphi (\tau )`$ becomes a piecewise constant function, making jumps at dividend (sample) dates.

Now the key question is: can we find exact solutions to the PDE, simple enough, which can be used to set up our implied mixed scheme? Fortunately, the answer is yes. Again the idea is to use a quadratic tradable, equalling $`x^2`$ at $`\tau =0`$. This is a good choice for two reasons. Firstly it is the simplest non-trivial tradable. Secondly it has an $`x`$-independent gamma, which is convenient for numerical reasons. Assuming that the solution remains a quadratic polynomial in $`x`$ we try a solution of the form

$$R(x,\tau )=A(\tau )x^2+B(\tau )x+C(\tau )$$

Plugging this into Eq. 3, we find the following relations for the functions $`A,B,C`$:

$$_\tau A(\tau )=\sigma ^2A(\tau )$$

$$_\tau B(\tau )=2\sigma ^2\varphi (\tau )A(\tau )$$

$$_\tau C(\tau )=\sigma ^2\varphi (\tau )^2A(\tau )$$

and they have the following solution

$$A(\tau )=e^{\sigma ^2\tau }$$

$$B(\tau )=2\sigma ^2_0^\tau \varphi (u)e^{\sigma ^2u}𝑑u$$

$$C(\tau )=\sigma ^2_0^\tau \varphi (u)^2e^{\sigma ^2u}𝑑u$$

These equations can easily be solved exactly, both in the case of discrete sampling (where $`\varphi `$ is piecewise constant) and continuous sampling. For example, if we have a continuous exponential weight function $`w(\tau )=e^{r\tau }/T`$, we have

$$\varphi (\tau )=\frac{1e^{r\tau }}{rT}$$

and

$$B(\tau )=\frac{2}{T(r\sigma ^2)}\frac{2e^{\sigma ^2\tau }}{rT}\left(1+\frac{e^{r\tau }\sigma ^2}{r\sigma ^2}\right)$$

$$C(\tau )=\frac{2}{T^2(r\sigma ^2)(2r\sigma ^2)}+\frac{e^{\sigma ^2\tau }}{r^2T^2}\left(1+\frac{2e^{r\tau }\sigma ^2}{r\sigma ^2}\frac{e^{2r\tau }\sigma ^2}{2r\sigma ^2}\right)$$

## 5 Results

We have implemented the mixed scheme in C++. The numerical tests were performed on a Pentium 233MHz machine. We have considered various Asian options as well as options on stocks paying cash dividends. For each option, we have compared results for three different grid sizes. The results coming from the largest grid are so much more accurate than the ones that we could find in the literature, that we have used this as benchmark. We claim that these results are accurate to at least six significant digits. The results compare well with numbers recently obtained in Ref. \[Zha99\]. The gridsizes that we have used are summarized in the table.

| Name | $`N_xN_\tau `$ |
| --- | --- |
| “Exact” | $`10^8`$ |
| 1 sec | $`10^6`$ |
| 10 ms | $`10^4`$ |

The time labels of course indicate the execution speed of the algorithm on our computer. The total number of points on the grid were divided over the $`x`$ and $`\tau `$ direction in such a way that $`N_\tau /N_x\sigma ^2T`$. In all cases, care was taken that non-differentiable points on the payoff (at the strike) fell on gridpoints. The boundary conditions in the $`\tau `$-direction were placed at zero and twice the strike. They are taken to be time-independent (since gamma is very small there). So for a payoff of the form

$$V(x,0)=(xk)^+$$

we also imposed

$$V(0,\tau )=0,V(2k,\tau )=k$$

Note that the scheme can be improved on this point: for high volatility it might be neccessary to place the bounds further away from the strike, while for low volatility the scheme can be improved by moving them closer. This leads to a speedup of at least a factor 5 for the lowest volatilities.

The first instrument we consider is a standard continuously sampled average strike Asian put option. This corresponds to the choice of weight function $`w(\tau )=e^{r\tau }/T`$ (see Eq. 4 with $`k=1`$). We use the parameters values used in Ref. \[RS95\]: initial stockprice $`S=100`$ and expiry time is 1 year. Note that except for the lowest volatility setting, the 1 second results are practically equal to the exact ones. As was mentioned before, the results can be improved by using tighter boundary conditions for low volatility.

| $`\sigma `$ | $`r`$ | Exact | 1 sec | 10 ms |
| --- | --- | --- | --- | --- |
|  | 0.05 | 1.24546 | 1.24546 | 1.24617 |
| 0.1 | 0.09 | .699292 | .699311 | .701360 |
|  | 0.15 | .251676 | .251712 | .255256 |
|  | 0.05 | 3.40481 | 3.40481 | 3.40500 |
| 0.2 | 0.09 | 2.62202 | 2.62202 | 2.62224 |
|  | 0.15 | 1.71019 | 1.71021 | 1.71193 |
|  | 0.05 | 5.62603 | 5.62602 | 5.62592 |
| 0.3 | 0.09 | 4.73955 | 4.73954 | 4.73940 |
|  | 0.15 | 3.60981 | 3.60981 | 3.60985 |

Table 1: Continuously sampled average strike put

To see how the scheme performs in a discrete sampling setting, we next consider a discretely sampled average strike Asian put. Parameters settings are $`S=100`$, $`\sigma =0.2`$, $`r=0.1`$ and expiry time is 1 year. There are $`N`$ sample dates, all with weight $`1/N`$ in terms of the money value of the stock and taken at the beginning of each of the $`N`$ equal length time periods in which the year is divided. This corresponds to a weight function

$$w(\tau )=\underset{i=1}{\overset{N}{}}\frac{e^{r\tau }}{N}\delta \left(\tau \frac{i}{N}\right)$$

Note that for $`N=1`$ the option is essentially a plain vanilla put with strike $`100`$. For $`N\mathrm{}`$, the option becomes a continuously sampled Asian. It must be noted that in most occasions sample dates do not correspond to gridpoints in the time direction. In some cases there are many more gridpoints than there are samples, in other cases the reverse is true. Obviously, the scheme handles both cases very well. This is due to the fact that the scheme is fitted to an exact solution of the PDE.

| $`N`$ | Exact | 1 sec | 10 ms |
| --- | --- | --- | --- |
| 1 | 3.75342 | 3.75342 | 3.75334 |
| 2 | 3.12047 | 3.12047 | 3.12062 |
| 4 | 2.79055 | 2.79055 | 2.79106 |
| 8 | 2.62151 | 2.62151 | 2.62217 |
| 16 | 2.53578 | 2.53578 | 2.53645 |
| 32 | 2.49257 | 2.49257 | 2.49324 |
| 64 | 2.47088 | 2.47088 | 2.47153 |
| 128 | 2.46001 | 2.46001 | 2.46065 |
| 256 | 2.45456 | 2.45457 | 2.45521 |
| 512 | 2.45184 | 2.45185 | 2.45249 |
| 1024 | 2.45048 | 2.45048 | 2.45112 |
| $`\mathrm{}`$ | 2.44912 | 2.44912 | 2.44976 |

Table 2: Discretely sampled average strike put

Since prices of average price Asians can be related to prices of average strike Asians by T(ime-reversal) duality \[HN00a\], it is not really neccessary to give results for average price Asians. But in order to allow the reader to compare our result to those in the literature, we will give the results anyway. We consider standard continuously sampled average price calls with parameter settings $`S=100`$, $`r=0.09`$ and expiry in 1 year.

| $`\sigma `$ | $`K`$ | Exact | 1 sec | 10 ms |
| --- | --- | --- | --- | --- |
|  | 95 | 8.80884 | 8.80884 | 8.80895 |
| 0.05 | 100 | 4.30823 | 4.30825 | 4.31013 |
|  | 105 | .958384 | .958385 | .958493 |
|  | 95 | 8.91185 | 8.91189 | 8.91538 |
| 0.1 | 100 | 4.91512 | 4.91515 | 4.91802 |
|  | 105 | 2.07006 | 2.07006 | 2.07022 |
|  | 90 | 14.9840 | 14.9841 | 14.9951 |
| 0.3 | 100 | 8.82876 | 8.82880 | 8.83275 |
|  | 110 | 4.69671 | 4.69670 | 4.69640 |
|  | 90 | 18.1886 | 18.1888 | 18.2055 |
| 0.5 | 100 | 13.0281 | 13.0282 | 13.0357 |
|  | 110 | 9.12429 | 9.12429 | 9.12454 |

Table 3: Continuously sampled average price call

As a final example we consider plain vanilla options on a stock paying cash dividend. We consider a stock with initial value $`S=100`$ and volatility $`\sigma =0.1`$. The stock will pay a cash dividend of 5 after half a year. Interest rate $`r=0.05`$. We consider a put and a call option on this stock expiring in 1 year. In this case we not only look at European style but also at American style options. To calculate the latter we take the maximum of the early exercise payoff and the calculated option value at each timestep. For a call, the early exercise payoff takes the form

$$(x\varphi (\tau )Ke^{r\tau })^+$$

in our coordinates. (Note that we can also use this technique to valuate American style average strike Asians). The results show that convergence is slower in the American case. This can be explained by the fact that the early exercise feature is only enforced at gridpoints, in effect approximating the American with a Bermudan option. Therefore the value is systematically underestimated. Of course this is a general problem when evaluating American options with finite difference schemes. Nevertheless, the accuracy of our scheme is still of order $`0.5\%`$ for such options in the 10 ms gridsize.

| Call | European | | | American | | |
| --- | --- | --- | --- | --- | --- | --- |
| $`K`$ | Exact | 1 sec | 10 ms | Exact | 1 sec | 10 ms |
| 95 | 6.63807 | 6.63808 | 6.63910 | 8.00342 | 8.00405 | 7.97394 |
| 100 | 3.89199 | 3.89199 | 3.89207 | 4.55708 | 4.55755 | 4.52858 |
| 105 | 2.05220 | 2.05220 | 2.05248 | 2.28620 | 2.28646 | 2.27272 |

| Put | European | | | American | | |
| --- | --- | --- | --- | --- | --- | --- |
| $`K`$ | Exact | 1 sec | 10 ms | Exact | 1 sec | 10 ms |
| 95 | 1.88141 | 1.88142 | 1.88244 | 2.26310 | 2.26192 | 2.25389 |
| 100 | 3.89148 | 3.89148 | 3.89156 | 4.72489 | 4.72226 | 4.70623 |
| 105 | 6.80784 | 6.80784 | 6.80812 | 8.22660 | 8.22212 | 8.20011 |

Table 4: Vanilla options with cash dividends

## 6 Conclusions and outlook

In this article we introduced a very simple and natural finite-difference scheme for pricing derivative securities. The scheme is easy to implement and very flexible. No special tricks need to be used to reach a high accuracy. The scheme follows in a straightforward manner from our formulation of the pricing problem in terms of tradables. The key idea is that one can often find exact solutions to the governing PDE. These solutions can be used to tune the finite-difference scheme in a very simple manner. Problems usually associated to the presence of drift terms, e.g. boundary layers, are trivially avoided. Numerical computations for arithmetic Asian options show that convergence is fast and neither the solution nor the greeks are plagued by oscillations. Also, financial instruments often depend on values of underlying on discrete points in time, and this can lead to discretization errors in a finite difference scheme when these points do not match with gridpoints. Our algorithm compensates for this problem by making use of exact solutions.

Although this article focussed on adapting a finite-difference scheme to exact solutions of a particular pricing PDE, it does not take too much effort to extent our method in such a way that observed prices are used to construct an implied finite difference scheme, extending the idea of implied trees. We will come back to this in a future article.

## Acknowledgements

We would like to thank Daniel Duffy and Piet Hemker for extensive discussions on boundary layer problems, fitting schemes, and singular perturbation methods.


format: text

text:
# Competing Quantum Orderings in Cuprate Superconductors: A Minimal Model

## I Introduction

We are witnessing an increase of experimental evidence indicating that (charge and magnetic) incommensuration characterize the low-energy physics of underdoped cuprate superconductors, both above and below the critical superconducting temperature $`T_c`$ . This poses a challenging problem to theorists since these compounds appear to be at the verge of a multitude of different quantum ordered states that can be tuned by varying physical parameters of the system. Theorists like to use the word “quantum criticality” to refer to this phenomenon. The truth is, however, that so far there is no rigorous theoretical framework that can explain unambiguously this variety of complex phenomena (superconductivity, magnetism, incommensuration, etc.), characterized by intrinsic nonlinearities producing large-scale sensitivities to small perturbations.

In this paper we present a minimal model of high-$`T_c`$ superconductors that clearly displays a variety of commensurate and incommensurate competing thermodynamic phases. The advantage of our approach is that it is simple, not subject to vague argumentation, and it allows one to rigorously and exhaustively explore a variety of physical observables.

Crucial to the experimental findings have been neutron scattering techniques which probe the spin dynamics of the high-$`T_c`$ compounds and suggest that different families of cuprate superconductors share inhomogeneously spin and charge textured phases as their quantum states . It is well-known that the stoichiometric (half-filled) compounds are antiferromagnetic (AF) Mott insulators as a result of strong electron interactions and it is upon charge doping that they display incommensuration. Indeed, in a recent paper  we have presented a unified theory for the commensurate resonance peak and low-energy incommensurate response observed in neutron scattering experiments. We ascribe both features to be purely magnetic in origin: They represent universal features signaling the existence of an incommensurate spin state both below and above the superconducting transition temperature. Our interpretation indicates that superconductivity is not the reason for the resonance peak, and that the incommensurate quantum state provides a reference state for the underdoped cuprates.

In previous work  we introduced two classes of microscopically inhomogeneous models which captured the magnetic and pairing properties of underdoped cuprates. Starting from a generalized $`t`$-$`J`$ model Hamiltonian in which appropriate terms mimic stripes, we found that inhomogeneous interactions that locally break magnetic $`SU(2)`$ symmetry can induce substantial pair binding of holes in the thermodynamic limit. We showed that these models qualitatively reproduce the ARPES and neutron scattering data seen experimentally. Moreover, based on the phenomenology of our microscopic model we developed a mean-field (“Josephson spaghetti”) model which provides a scenario for the macroscopic superconducting state. From our model Hamiltonian of random stripe separation $`r`$ and associated inter- and intra-stripe random Josephson coupling $`J(r)1/r`$ we obtained the experimentally observed relation $`T_c(x)J(r)[r]^1=\delta (x)`$, where $`x`$ represents charge doping and $`\delta `$ is the inverse of a characteristic length scale associated with the incommensuration.

Our previous numerical simulations have helped to elucidate a certain fraction of the underdoped cuprate puzzle. Here we assume a different strategy complementary to the previous approach: We propose a minimal homogeneous model based on the one-band repulsive Hubbard Hamiltonian on a square lattice. The attractive particle-particle singlet channel is included through the nearest neighbor attraction $`V`$ , which produces predominantly $`d`$-wave pairing close to half-filling. We solve this model at the mean-field level allowing all physical quantities to vary from one lattice site to another. In this way, quantum morphologies characterized by a certain correlation length $`\xi `$ will appear when the minimum length of our supercell is larger than $`\xi `$.

The basic question we address in this paper is whether antiferromagnetic striped ordering  and $`d`$-wave superconductivity can coexist in a certain parameter range of our model. In our opinion, this question is crucial for the understanding of the superconducting state in the underdoped materials.

In the next Section we introduce the model and briefly describe the way we solve it. We then summarize the resulting competing quantum states in a phase diagram and discuss the spectral density. At the end of the paper, we review our main findings.

Some of the results presented in this paper have been introduced in Ref. ; the analysis of the spectral density is described here for the first time.

## II Minimal Model

We consider here a minimal model that brings together stripes and superconductivity. The model is the two-dimensional one-band Hubbard Hamiltonian with an on-site repulsion $`U`$ . Pairing correlations are introduced by including the nearest neighbor attraction $`V`$ . The effective minimal Hamiltonian is thus

$`H_{tt^{}U}`$ $`=`$ $`{\displaystyle \underset{i,j,\sigma }{}}t_{ij}c_{i\sigma }^{}c_{j\sigma }^{}+U{\displaystyle \underset{i}{}}n_in_i`$ (1)
$`H`$ $`=`$ $`H_{tt^{}U}+V{\displaystyle \underset{ij}{}}n_in_j,`$ (2)
where the operator $`c_{i\sigma }^{}`$ ($`c_{j\sigma }^{}`$) creates (annihilates) an electron with spin $`\sigma `$ on the lattice site $`i`$, and $`n_i=c_i^{}c_i^{}+c_i^{}c_i^{}`$ represents the electron density on site $`i`$. The hopping $`t_{ij}`$ equals $`t`$ for nearest neighbors and $`t^{}`$ for for the second-nearest neighbor sites $`i`$ and $`j`$. For our computations, we use the unrestricted mean-field approximation to this Hamiltonian,

$`H_{MF}={\displaystyle \underset{ij\sigma }{}}t_{ij}c_{i\sigma }^{}c_{j\sigma }^{}+U{\displaystyle \underset{i}{}}n_in_i+n_in_i`$ (3)
$`+{\displaystyle \underset{ij}{}}c_i^{}c_j^{}\mathrm{\Delta }_{ij}^{}+\mathrm{H}.\mathrm{c}.,`$ (4)
where $`\mathrm{\Delta }_{ij}=Vc_ic_j`$ is the MF superconducting order parameter. The effect of $`V`$ in our model is limited to the generation of superconducting correlations. We do not explicitly address the important issue of the microscopic origin of the attraction $`V`$ .

A typical zero-temperature MF inhomogeneous solution is shown in Fig. 1. In the lowest energy configuration, the spin density develops a soliton-like AF anti-phase domain boundary — a stripe — at which the AF order parameter changes sign. At the domain boundary, the electronic charge density is depleted. The width of the domain wall, $`\xi _{DW}`$, decreases with increasing on-site repulsion $`U`$. However, for values of $`U`$ that are not much larger than the hopping $`t`$, the charge per unit length of the optimal (the lowest energy) stripe remains the same and is close to unity near half-filling for $`t^{}=0`$. The bond-centered stripes are favored relative to the site-centered ones, although the energy difference in our case is small due to the smooth charge distribution.

Stripe formation is the result of the competition between antiferromagnetism (which can lead to charge confinement) and delocalization (driven by kinetic energy). Non-linear feedback is responsible for these complex patterns. A half-filled (one electron per site) antiferromagnet is the state with the lowest energy per electron. Upon small doping, the energy can be optimized by segregating the excess electrons or holes into domain walls or charged clusters, and keeping the bulk antiferromagnetism unperturbed. The anti-phase domain walls are favored over the simple charged stripes as they allow the charge carriers to optimize their transverse fluctuations in the direction across stripes, thereby lowering their kinetic energy. The linear filling of the emergent stripes vary depending upon the specific nature of the band structure.

For different band structures the exact relation between the doping $`x`$ and inter-stripe distance, $`L(x)`$, may change; however, any model whose ground state is AF at zero doping, can be expected to have AF stripes for a finite doping, with incommensuration proportional to the doping, $`1/L(x)x`$, near half-filling. For example, negative next-nearest neighbor hopping $`t^{}`$ (relevant in the hole-doped cuprates), modifies the stripe filling without compromising the stripe phase stability relative to commensurate AF at the MF level. The stripe filling is a monotonically decreasing function of the magnitude of $`t^{}`$, with the filling 1/2 occurring when $`t^{}=0.35t`$ (Figure 2). While filling-one stripes correspond to a correlated insulator, the fractional filling stripes in the $`t`$-$`t^{}`$-$`U`$ model (Eq. (1)) are metallic, which can be understood in terms of the partial occupancy of the mid-gap band formed due to the stripes. In the case of insulating stripes ($`t^{}=0`$) a threshold value of attraction $`V`$ should be exceeded to generate superconductivity and hence to overcome the insulating gap; however, in the case of metallic stripes one would expect that any attraction would yield superconductivity through the Cooper instability. Indeed, this is what we find . On the contrary, the diagonal stripes which can also be the ground states of the Hubbard model, particularly at low dopings, always have a filling of one electron per Cu site, and hence are insulators. This makes diagonal stripes antagonistic to superconductivity , and also agrees with the experimental observations .

From Figure 1 it is clear that the superconducting order parameter $`\mathrm{\Delta }_{ij}^{d(s^{})}`$ is maximized on the stripes and is not smooth (even within the stripe) due to the presence of the AF background. In addition to the dominant $`d`$-wave component, there is a small extended $`s`$-wave ($`s^{}`$) component generated on the stripe, which can be interpreted as a distortion of the $`d`$-wave at the level of about $`10\%`$. This happens because the symmetry of the lattice has been spontaneously broken by the stripes. For dopings less than about $`10\%`$ (corresponding to $`L(x)>10`$ lattice sites) the stripes have negligible overlap . In this regime, the amplitude of the superconducting order parameter on the stripes no longer depends upon the stripe-stripe separation. For higher doping levels, an overlap between the superconducting order parameters on adjacent stripes is established, and for even higher doping the stripes “melt” and superconductivity becomes homogeneous, of a classical BCS type .

### A Phase diagram

From our zero-temperature analysis of the coexistence of AF stripes (ICAF) and superconductivity , a simple qualitative thermodynamic phase diagram emerges. In the conjectured phase diagram, we utilize the finite-temperature AF/ICAF phase diagram of the Hubbard model together with the superconducting (SC) phase diagram of the $`t`$-$`V`$ model. The SC phase diagram is obtained in the homogeneous MF , while the AF/ICAF phase boundary is constructed under the assumption of the second order phase transition between the homogeneous and inhomogeneous states . For a suitable choice of parameters, for instance $`U=2t`$ and $`V=t`$, the SC and the AF/ICAF regions in the phase diagram intersect, as shown in Fig. 3. The energy scale associated with the AF/ICAF region of the phase diagram is much larger than that of the SC part. Thus, one expects that only the SC phase boundary is modified when it passes through the AF/ICAF region. The central result of our work is that the superconductivity does not disappear in the region of the AF stripes, but rather becomes striped, with anisotropic superfluid stiffness.

Based on familiar Josephson coupling physics, in the region of coexistence of superconductivity and stripes, we can expect a part that is a globally coherent striped superconductor (SSC). The rest of the intersection region is covered by an exotic phase which, if it were perfectly orientationally ordered, would be a superconductor in one direction and a strongly-correlated insulator in the other. In reality, due to the meandering of the stripes and their break-up into finite segments , the state is likely to be highly inhomogeneous and neither an insulator, nor a superconductor, but also not a simple metal. In agreement with the experimental attribution, we refer to this region as a “strange metal” (SM). The line separating the SM from the rest of the AF/ICAF region, in the context of the experiments, can be associated with the crossover to the strong pseudogap regime, and corresponds to the opening of the local superconducting gap. The high-temperature boundary separating AF/ICAF phases from the homogeneous state, marks the onset of the weak pseudogap. For small dopings, there is also a possibility of a transition from the vertical to diagonal stripes .

### B Spectral Density

In this Section we demonstrate how our model can be applied to compute the energy spectrum of the system, which can then be compared with the experimental data . At any temperature, the MF solution yields a self-consistent spectrum $`\{E_n\}`$ of Bogoliubov quasiparticles, which diagonalize the MF Hamiltonian in Eq. (3). Knowing how the electron operators are related to the Bogoliubov quasiparticles, one can compute the electronic spectral densities for positive (particle) and negative (hole) biases. Experimentally, angle resolved photoemission (ARPES) measures the electronic spectral density integrated in the window of $`\pm \mathrm{\Delta }\epsilon `$ around the Fermi energy.

In Figure 4 we show the computed ARPES spectra for various energy integration windows. The symmetry of the spectrum is spontaneously broken due to the presence of stripes (the stripes run along the horizontal $`k`$ direction). For small integration window near the Fermi surface, the spectral weight is concentrated around the $`(0,\pi )`$ point. The reason is that the stripes gap out the flat parts (“diagonals”) of the Fermi surface, while keeping the quasiparticles around $`(0,\pi )`$ gapless if $`t^{}<0`$ or weakly gapped if $`t^{}=0`$. Since these are the quasiparticles that are primarily responsible for the formation of $`d_{x^2y^2}`$ superconductivity, it is this particular structure of the “stripe gap” that allows for the peaceful coexistence of stripes and superconductivity in our model. Indeed, in the absence of superconductivity ($`V=0`$), the spectral patterns remain essentially unchanged, except for the enhanced weight around $`(0,\pi )`$.

For larger energy integration windows, the Fermi surface gradually “reconstructs,” with the energy states around the diagonal reappearing when $`\mathrm{\Delta }\epsilon `$ exceeds the “stripe gap.”

Notice that due to twinning and the expected presence of stripe domains in the real experimental systems the computed spectra have to be symmetrized. Similar results for the striped spectra (but without superconductivity) have been obtained previously . Similarly, one can calculate temperature-dependent specific heat, entropy, spin susceptibility, among other experimentally measurable quantities, as we will report elsewhere.

## III Conclusions

In summary, we have presented a minimal model supporting the coexistence of incommensurate antiferromagnetism (“stripe” order) and global anisotropic superconductivity. Contrary to the common belief, these two order parameters can coexist and our calculation is a faithful realization of such a physical situation. At the same time, the stripe order provides a natural competing order parameter limiting the increase of the superconducting transition temperature on the underdoped side of cuprates.

Our model displays a variety of other competing homogeneous and inhomogeneous thermodynamic phases. Based on the model, we constructed a phase diagram that captures many features of the superconducting cuprates. Finally, we computed the photoemission spectra which give a clear interpretation of experimental data.

This work was supported by the U.S. DOE.


text:
# Group–theoretical structure of quantum measurements and equivalence principle

## 1 Introduction

The detection of the effects of a gravitational field upon a quantum system was carried out for the first time 25 years ago . Since then, this kind of experiments have achieved an impressive accuracy and feasibility , and they involve the interaction of gravity with an intrinsically quantum–mechanical quantity , and therefore depend upon Planck’s constant $`\mathrm{}`$ and Newton’s universal gravitational constant $`G`$ . This last remark means also that the equivalence principle  can be analyzed at the quantum realm.

In order to avert any misunderstanding here we follow the definitions of , in other words, the so–called weak equivalence principle (WEP), which is based on the principle that the ratio of the inertial mass to the gravitational–passive–mass is the same for all bodies, asserts that gravitation is locally equivalent to an acceleration of the reference frame. Einstein equivalence principle (EEP) means here: for every pointlike event of spacetime, there exists a sufficiently small neighborhood such that in every local, freely falling frame in that neighborhood, all the laws of physics obey the laws of special relativity.

The validity of the classical WEP has been verified with a high precision  (for a recent description of the current experimental status in this context see ) and therefore it could be a natural assumption to accept the validity of this principle at quantum level. Nevertheless, there are already results  which prove that even the simplest classical kinematical concepts show conceptual difficulties when extrapolated into the quantum regime. For instance, there is no consistent definition of the time–of–flight probability density in the case of a quantum particle, without classical counterpart, falling freely in a gravitational field. The possibility of the emergence of a violation of EEP in the case of a freely falling atom, which is being continuously monitored, as a consequence of the coupling with the involved detecting device, has also been analyzed by Viola and Onofrio. At this point it is noteworthy to comment that in this last work the problem has not been addressed from the point of view of the symmetry properties of the measuring process.

Hence at this point we may pose the following question: is the equivalence principle also valid at the quantum realm? Though there are works that claim the validity of this principle in the quantum regime , we may already also find some results which single out quantum characteristics that could lead to the violation of the equivalence principle .

Despite its spectacular success, quantum theory is beset with conceptual problems , for instance, the problem of the classical limit of this theory, which is closely related with the notions of “observation” and “measurement”, comprises one of the more long–standing conundrums in modern physics .

In this respect, one of the ideas that could solve this problem is the so–called decoherence model (DM) , in which two systems (usually called collective system and environment, here we use the terminology appearing in , see page 268) are coupled by an interaction Hamiltonian, such that it destroys quantum interferences at a macroscopic level.

The fact that gravity couples universally to all forms of matter  could lead to an explanation of the emergence of a classical spacetime from a quantum model . The possible role of the gravitational field, as a decoherence environment, has already been considered . We may also find some approaches in which gravity plays a fundamental role in a possible modification of the formalism of quantum mechanics .

In the present work we will explore the following question: is there a relation between the validity of EEP at quantum level and the role of gravity as a decoherence environment? This question has already been considered , but now it will be done from a different perspective, i.e., analyzing the behaviour of the transverse group of a continuous measuring process. In order to address this issue the group–theoretical properties of a particular quantum measurement process in a curved manifold will be considered. It will be shown, using the so–called restricted path integral formalism (RPIF), that the process that monitors the coordinates of a quantum particle could always contain information concerning the gravitational field, even when the corresponding measuring process takes place, completely, in a locally flat reference frame. In other words, it seems that with the presence of a measuring process EEP breaks down. From this last fact it will be claimed that gravity could act always as a decoherence environment, i.e., even local experiments (this phrase means those experiments carried out within the corresponding tangent space) could suffer the action of the corresponding gravitational field.

A possible connection of this last fact with the quantization of the gravitational field is also explored. It will be claimed (resorting to an already known result from quantum optics) that this violation of EEP could disappear under the presence of a quantum theory of gravity. In other words, if the involved model contains a classical gravitational field, then EEP will be always violated. We may rephrase this stating that the quantum properties of the field avoid the violation of EEP.

## 2 Gravity and group–theoretical structure

### 2.1 Restricted path integral formalism

The group–theoretical structure of quantum continuous measurements has been analyzed always in the context of flat–manifolds, i.e., the possible effects of gravity upon this aforementioned group–theoretical structure have not been considered . A possible reason for this lies in the fact that the validity of EEP in connection with quantum continuous measurements is always postulated. Nevertheless, there is already some evidence  which seems to indicate that this assumption could not always be valid.

Among the already existing attempts to solve the quantum measurement problem  we may find the so–called restricted path integral formalism (RPIF) . This formalism schematizes a continuous quantum measurement with the introduction of a restriction on the integration domain of the corresponding path integral. This last condition can also be reformulated in terms of a weight functional that has to be considered in the path integral.

Let us suppose to have a particle exhibiting one–dimensional movement. The amplitude $`A(q^{\prime \prime },q^{})`$ for this particle to move from the point $`q^{}`$ to the point $`q^{\prime \prime }`$ is called propagator. It is given by Feynman

$$A(q^{\prime \prime },q^{})=d\left[q\right]\mathrm{exp}\left(\frac{i}{\mathrm{}}S_{[q]}\right),$$
(1)
here we must integrate over all the possible trajectories $`q(t)`$, and $`S_{[q]}`$ is the action of the system, which is defined as

$$S_{[q]}=_t^{}^{t^{\prime \prime }}𝑑tL(q,\dot{q}).$$
(2)
Let us now suppose that we continuously measure the position of this particle, such that we obtain as measurement output a certain function $`a(t)`$. In other words, the measuring process gives the value $`a(t)`$ for the coordinate $`q(t)`$ at each time $`t`$, and this output has associated a certain error $`\mathrm{\Delta }a`$, which is determined by the experimental resolution of the measuring device. The amplitude $`A_{[a]}(q^{\prime \prime },q^{})`$ can be now thought of as a probability amplitude for the continuous measuring process to give the result $`a(t)`$. Taking the square modulus of this amplitude allows us to find the probability density for different measurement outputs.

Clearly, the integration domain in the Feynman path–integral should be restricted to those trajectories that match with the experimental output. RPIF says that this condition can be introduced by means of a weight functional $`\omega _a[q]`$ . This means that expression (3) becomes now

$$A_a=d\left[q\right]\omega _a[q]\mathrm{exp}\left(\frac{i}{\mathrm{}}S[q]\right).$$
(3)
At this point it is noteworthy to comment that the action appearing in this last expression does not include the measuring device, i.e., all the information about the experimental apparatus is contained in the weight functional. The introduction of $`\omega _a[q]`$ does not imply the violation of the uncertainty relations. Indeed, considering the case in which position is being monitored (see chapter 6 of ), it is readliy seen that RPIF includes the unavoidable back reaction effect of the measuring device, which is a direct consequence of Heisenberg’s uncertainty relation.

### 2.2 Group–theoretical structure

The group–theoretical properties of quantum continuous measurements comprises two different kinds of structures , namely, the transverse group (which describes the homogeneity of the space of measurement outputs, and therefore transforms alternative measurement outputs into each other), and the longitudinal semigroup (it accounts for the evolution of the corresponding quantum system subject to a continuous measurement).

In the present analysis we will focus on the transverse group. The idea behind this is to find a violation of EEP using as core of our study a very simple, but illustrative situation, i.e., the case of a particle whose coordinates are being monitored.

The fundamental assumption here is to accept that, before the evaluation of any amplitude, all possible measurement outputs are equivalent. As pointed out in , this condition means that there is some group $`G`$ (the transverse group) which acts transitively on the set of all possible measurement outputs.

If $`gG`$, then the action upon measurement outputs, $`\alpha `$, and paths, $`[q]`$, are, respectively

$$g:\alpha g\alpha ,$$
(4)
$$g:[q]g[q].$$
(5)
Clearly, the weight functional contains all the information about the interaction between measuring device and measured system, and in consequence any existing symmetries associated with the measuring process will imply the invariance of $`\omega _a[q]`$ with respect to the group(s) related with the corresponding symmetries.

Let us now suppose that the measuring device is embedded in a flat manifold, and that $`G`$ is a symmetry of the corresponding experimental construction. In other words, it is fulfilled that

$$\omega (\alpha ,[q])=\omega (g\alpha ,g[q]),$$
(6)
here $`gG`$.

As a particular experiment let us assume that the measuring device monitors the coordinates of our particle, and that the symmetry group, $`G`$, describes shifts in the configuration space. Hence, $`G`$ is defined as

$$G=\left\{c(t)\right|t^{}tt^{\prime \prime }\}.$$
(7)
At this point it is noteworthy to mention that $`G`$ contains all possible (smooth) curves $`c(t)`$.

The action of $`gG`$ upon $`\alpha `$ and $`[q]`$ is

$$g\alpha =\left\{q_\alpha (t)+c(t)\right|t^{}tt^{\prime \prime }\},$$
(8)
$$g[q]=\left\{q(t)+c(t)\right|t^{}tt^{\prime \prime }\},$$
(9)
where $`q_\alpha (t)`$ is the trajectory related to the measurement output $`\alpha `$.

Let us now suppose that the corresponding measuring device is located in a region where a non–uniform gravitational field exists. If $`xM`$, where $`M`$ denotes the involved curved manifold, then we may find a, small enough, neighborhood around $`x`$ such that, according to EEP, in this neighborhood the laws of physics are the laws of special relativity . Here we consider that the experiment takes place within this neighborhood, i.e., the measuring device is located completely in this neighborhood. At this point it is noteworthy to comment that in the case of a non–uniform gravitational field the involved neighborhood will not cover the whole manifold. This very known fact will play a very important role in the possible breakdown of EEP in connection with the invariance properties of continuous quantum measurements.

In the case of a flat spacetime our group $`G`$ contains all possible (smooth) curves $`c(t)`$. At this point we will focus on the following question: under the presence of a non–uniform gravitational field, which are the symmetries (if any) of our measuring process? This may be rephrased saying: is there any group, $`\stackrel{~}{G}`$, under whose action the corresponding weight functional is invariant (in the sense of expression (6))?

The answer to this question seems to have, at least, three possibilities:

1) $`\stackrel{~}{G}`$ contains all possible (smooth) curves, i.e., $`\stackrel{~}{G}=G`$ . Clearly, if $`x`$ is a point in the corresponding manifold, $`M`$, then, as is already known , the validity region of the involved tangent space, $`T_xM`$, is in the case of a curved manifold limited, i.e., in a general gravitational field Lorentz frames are local, and not global. From the definition of $`G`$ (expression (7)), it is readily seen that we may find a path $`[q]`$ and an element $`gG`$, such that $`g[q]`$ has some of its points outside the validity region of $`T_xM`$. In this situation, if $`g[q]T_xM`$, then in order to describe the invariance properties of our experiment (which takes place, completely, in $`T_xM`$) we must include the tangent spaces of some other points in $`M`$ (because $`T_xM`$ does not cover the whole manifold). In other words, having $`T_xM`$ does not suffice to describe the invariance properties of our measuring process, i.e., we must also have further information concerning the geometry of the involved manifold. This fact implies that if we want to describe the invariance properties of a local experiment we do need information about the gravitational field. This last assertion does not match with EEP. Indeed, this principle affirms that in order to describe the measurement outputs of a local experiment only the laws of special relativity and $`T_xM`$ are required.

2) $`\stackrel{~}{G}`$ does not include all possible (smooth) curves, i.e., $`\stackrel{~}{G}G`$, but only those that lie completetly within $`T_xM`$. We may reformulate this last assertion stating that $`G`$ must contain information about the gravitational field. Indeed, a nonvanishing gravitational field imposes restrictions upon $`G`$, such that it becomes $`\stackrel{~}{G}`$. But in the case of a flat spacetime the invariance properties are described by $`G`$. In other words, in this second alternative EEP breaks also down. Indeed, it is possible to detect (by means of the invariance properties of the corresponding measuring process) the presence of a gravitational field. This last fact also implies that the measuring device is affected by the gravitational field, even when it lies completely within $`T_xM`$. This may be rephrased stating that the corresponding weight functional must depend upon the gravitational field, even when the experiment is carried out within the validity region of our locally flat coordinate system.

3) Under the presence of a nonvanishing gravitational field, $`\omega (\alpha ,[q])`$ is not invariant under shifts in the configuration space. Hence once again the weight functional must depend upon the gravitational field, and therefore in this case EEP breaks also down.

## 3 Discussion

### 3.1 Gravity as decoherence environment and invalidity of EEP

The previous arguments seem to indicate that in curved manifolds, there are measuring processes whose invariance properties could render a violation of EEP. The symmetry properties in a Minkowskian spacetime are not the same as those emerging in a freely falling coordinate system inmersed in a curved manifold.

From cases (2) and (3) we could write the weight functional related to a measuring process as

$$\omega =\omega (\sigma ,\stackrel{~}{g};\alpha ,[q]),$$
(10)
where the parameters $`\sigma `$ and $`\stackrel{~}{g}`$ point out, explicitly, the dependence of the corresponding weight functional upon certain characteristics of the measuring apparatus (for instance, its experimental resolution), and upon the gravitational field, respectively.

From the role that the involved gravitational field, $`\stackrel{~}{g}`$, plays in expression (10), we could be tempted to assert that the gravitational field acts, always, as part of a measuring device. In other words, the breakdown of EEP at quantum level would be closely related to the fact that the gravitational field could act always as a decoherence environment, and in consequence it would define a “universal” environment. The possibility of a collapse of the wave function driven by gravitational effects has already been considered . Nevertheless, the new ingredient put forward in the present work states a connection between the invalidity at quantum level of EEP and the possibility of having gravity as a decoherence environment.

### 3.2 Validity of EEP and quantum gravity

It has already been claimed  that gravity–wave interferometers could probe the fuzziness of space–time. This claim shows us that the detection of effects coming from a quantum theory of gravity may not lie very far from the present technological possibilities. Hence, at this point we wonder if this conceptual inconsistency between general relativity and quantum measurement theory renders some evidence for the existence of a quantum theory of gravity.

Starting with the case of the so–called quantum beat phenomena  (and also resorting to the similarity that Maxwell’s equations and Einstein linearized equations show ) we wonder if this violation of EEP disappears with a quantized gravitational field. We will see that this also implies that any experiment which, in the future, could prove the validity at quantum level of EEP would be an indirect proof of the existence of a quantum theory of gravity.

To this end let us remember that in quantum optics a calculation which treats matter and radiation on the same footing (matter is described quantum–mechanically and radiation along the ideas of quantum electrodynamics) explains the missing beats that the case of a three–level atomic system of $`\mathrm{\Lambda }`$ type shows , and that these calculations are also compatible with quantum measurement theory.

These missing beats can not be understood if light is described according to Maxwell’s equations, even if they are complemented with vacuum fluctuations. An explanation to this lies in the fact that these calculations contradict quantum measurement theory.

Summing up, in the case of quantum beats, if the field is treated classically, then the results do not match with quantum measurement theory, but the problem disappears with the introduction of a quantized electromagnetic field. In the present work we have a similar situation, matter has been treated quantum–mechanically, the involved field, gravity, is a purely classical entity, and additionally we have assumed the validity of quantum measurement theory. Having in hindsight the previous arguments of quantum optics, it is no surprise at all that a contradiction appears precisely at this point. Hence, we could re–interpret our results asserting that the violation of EEP is a consequence of having a classical gravitational field, and not a quantum one. In other words, if EEP is corroborated, experimentally, at quantum level, then the question at this point would read: could this fact be an indirect evidence in favor of a quantum theory of gravity?

### 3.3 Open topics

As has been stated from the very begining (see section 2.2), we have restricted ourselves to the case of the transverse group. Hence, an additional issue in this context comprises the analysis of the consequences of the inclusion in the present model of the longitudinal semigroupoid, and as it is already know , this semigroupoid (if the Hamiltonian does not depend explicitly on time we have a semigroup) is related to the time evolution under continuous measurement of the corresponding system. For instance, knowing that decoherence may be closely related to the emergence of an arrow of time  and accepting that the violation of EEP could be connected with decoherence, it would be interesting to explore the possible interelations among the gravitational field, the longitudinal semigroup, and the breakdown of the time–reversal symmetry. This is another issue that has to be addressed.

Finally, a word must be said about the possible consequences of taking into account the measurement process of a relativistic particle. It has already been proved  that in the case of the position monitoring of a relativistic particle the resulting amplitude is exponentially small outside the light–cone of the space–time point of the corresponding measurement output. This last remark could modify in a substantial manner, for instance, our symmetry group (expression (7)), and therefore also some of the corresponding conclusions. This relativistic analysis is currently an open problem , and will be addressed in a separate paper.

### 3.4 Conclusions

We have shown that the transverse group associated to the continuous monitoring of the position of a quantum particle, inmersed in a gravitational field, contains information concerning this field. In other words, it seems that with the presence of a measuring process the equivalence principle may, in some cases, break down. The possible relation between the breakdown of the equivalence principle, at quantum level, and the fact that the gravitational field could act always as a decoherence environment has also been analyzed. The phenomena of quantum beats of quantum optics allowed us to consider the possibility that the experimental corroboration of the equivalence principle at quantum level could be taken as an indirect evidence in favor of the quantization of the gravitational field, i.e., the quantum properties of this field avoid the violation of the equivalence principle.

Acknowledgments.

The author would like to thank A. A. Cuevas–Sosa for his help, and D.-E. Liebscher for the fruitful discussions on the subject. The hospitality of the Astrophysikalisches Institut Potsdam is also kindly acknowledged. This work was supported by CONACYT (México) Posdoctoral Grant No. 983023.


text:
# I Introduction

## I Introduction

In paper  the unified approach to the construction of confidence intervals and confidence limits for a signal with a background presence, in particular for Poisson distributions, has been proposed. The method is widely used for the presentation of physical results  though a number of investigators criticize this approach

In present paper we use a simple method for construction of confidence intervals for parameter of Poisson distribution for signal in the presence of background which has Poisson distribution with known value of parameter. This method is based on the statement  that the true value of parameter of the Poisson distribution in the case of observed number of events $`\widehat{x}`$ has a Gamma distribution. In contrast to the approach proposed in , the width of confidence intervals in the case of $`\widehat{x}=0`$ is independent on the value of the parameter of the background distribution. The described procedure has both Bayesian and frequentist interpretations.

In Section 2 the method of construction of confidence intervals for parameter of Poisson distribution for signal in the presence of background which has Poisson distribution with known value of parameter is described. The results of confidence intervals construction and their comparison with the results of unified approach are also given in the Section 2. The main results of this note are formulated in the Conclusion.

## II The method of construction of confidence intervals

Assume that in the experiment with the fixed integral luminosity (i.e. a process under study may be considered as a homogeneous process during given time) the $`\widehat{x}`$ events of some Poisson process were observed. It means that we have an experimental estimation $`\widehat{\lambda }(\widehat{x})`$ of the parameter $`\lambda `$ of Poisson distribution. We have to construct a confidence interval $`(\widehat{\lambda }_1(\widehat{x}),\widehat{\lambda }_2(\widehat{x}))`$, covering the true value of the parameter $`\lambda `$ of the distribution under study with confidence level $`1\alpha `$, where $`\alpha `$ is a significance level. It is known from the theory of statistics , that the mean value of a sample of data is an unbiased estimation of mean of distribution under study. In our case the sample consists of one observation $`\widehat{x}`$. For the discrete Poisson distribution the mean coincides with the estimation of parameter value, i.e. $`\widehat{\lambda }=\widehat{x}`$ in our case. As it is shown in ref  the true value of parameter $`\lambda `$ has Gamma distribution $`\mathrm{\Gamma }_{1,\widehat{x}+1}`$, where the scale parameter is equal to 1 and the shape parameter is equal to $`\widehat{x}+1`$ (see Fig.1), i.e.

$$P(\lambda |\widehat{x})=P(\widehat{x}|\lambda )=\frac{\lambda ^{\widehat{x}}}{\widehat{x}!}e^\lambda .$$
(1)
Note that formula (2.1) results from the Bayesian formula

$$P(\lambda |\widehat{x})P(\widehat{x})=P(\widehat{x}|\lambda )P(\lambda )$$
(2)
in the assumption that all possible values of parameter $`\lambda `$ have equal probability, i.e. $`P(\lambda )=const`$. In this assumption the probability that unknown parameter $`\lambda `$ obeys the inequalities $`\lambda _1\lambda \lambda _2`$ is given by evident Bayesian formula

$$P(\lambda _1\lambda \lambda _2|\widehat{x})=P(\lambda _1\lambda |\widehat{x})P(\lambda _2\lambda |\widehat{x})=_{\lambda _1}^{\lambda _2}P(\lambda |\widehat{x})𝑑\lambda ,$$
(3)
$`P(\lambda _1\lambda |\widehat{x})=_{\lambda _1}^{\mathrm{}}P(\lambda |\widehat{x})𝑑\lambda `$,

where $`P(\lambda |\widehat{x})`$ is determined by formula (2.1).

Formula (2.3) has also well defined frequentist meaning. Using the identity

$$\underset{i=\widehat{x}+1}{\overset{\mathrm{}}{}}\frac{\lambda _1^ie^{\lambda _1}}{i!}+_{\lambda _1}^{\lambda _2}\frac{\lambda ^{\widehat{x}}e^\lambda }{\widehat{x}!}𝑑\lambda +\underset{i=0}{\overset{\widehat{x}}{}}\frac{\lambda _2^ie^{\lambda _2}}{i!}=1$$
(4)
one can rewrite formula (2.3) as

$$P(\lambda _1\lambda \lambda _2|\widehat{x})=1P(n\widehat{x}|\lambda _2)P(n>\widehat{x}|\lambda _1)=P(n\widehat{x}|\lambda _1)P(n\widehat{x}|\lambda _2),$$
(5)
where $`P(n\widehat{x}|\lambda )={\displaystyle \underset{n=0}{\overset{\widehat{x}}{}}}{\displaystyle \frac{\lambda ^ne^\lambda }{n!}}`$ and $`P(n>\widehat{x}|\lambda )={\displaystyle \underset{n=\widehat{x}+1}{\overset{\mathrm{}}{}}}{\displaystyle \frac{\lambda ^ne^\lambda }{n!}}`$.

The right hand side of formula (2.5) has well defined frequentist meaning and in fact it is one of the possible definitions of the confidence interval in frequentist approach See, however, ref. . As an example, such type the shortest 90% CL confidence interval in case of observed number of events $`\widehat{x}=4`$ is shown in Fig.2.

For instance, for the case $`\lambda _2=\mathrm{}`$ formula (2.5) takes the form

$$_{\lambda _1}^{\mathrm{}}P(\lambda |\widehat{x})𝑑\lambda =P(\lambda _1\lambda |\widehat{x})=\underset{n=0}{\overset{\widehat{x}}{}}P(n|\lambda _1)=P(n\widehat{x}|\lambda _1),$$
(6)
which has evident frequentist meaning too.

Let us consider the Poisson distribution with two components: signal component with a parameter $`\lambda _s`$ and background component with a parameter $`\lambda _b`$, where $`\lambda _b`$ is known. To construct confidence intervals for parameter $`\lambda _s`$ of signal in the case of observed value $`\widehat{x}`$ we must find the distribution $`P(\lambda _s|\widehat{x})`$.

At first let us consider the simplest case $`\widehat{x}=\widehat{s}+\widehat{b}=1`$. Here $`\widehat{s}`$ is a number of signal events and $`\widehat{b}`$ is a number of background events among observed $`\widehat{x}`$ events.

The $`\widehat{b}`$ can be equal to 0 and to 1. We know that the $`\widehat{b}`$ is equal to 0 with probability

$$p_0=P(\widehat{b}=0)=\frac{\lambda _b^0}{0!}e^{\lambda _b}=e^{\lambda _b}$$
(7)
and the $`\widehat{b}`$ is equal to 1 with probability

$$p_1=P(\widehat{b}=1)=\frac{\lambda _b^1}{1!}e^{\lambda _b}=\lambda _be^{\lambda _b}.$$
(8)
Correspondingly, $`P(\widehat{b}=0|\widehat{x}=1)=P(\widehat{s}=1|\widehat{x}=1)={\displaystyle \frac{p_0}{p_0+p_1}}`$ and $`P(\widehat{b}=1|\widehat{x}=1)=P(\widehat{s}=0|\widehat{x}=1)={\displaystyle \frac{p_1}{p_0+p_1}}`$.

It means that distribution of $`P(\lambda _s|\widehat{x}=1)`$ is equal to sum of distributions

$$P(\widehat{s}=1|\widehat{x}=1)\mathrm{\Gamma }_{1,2}+P(\widehat{s}=0|\widehat{x}=1)\mathrm{\Gamma }_{1,1}=\frac{p_0}{p_0+p_1}\mathrm{\Gamma }_{1,2}+\frac{p_1}{p_0+p_1}\mathrm{\Gamma }_{1,1},$$
(9)
where $`\mathrm{\Gamma }_{1,1}`$ is Gamma distribution with probability density $`P(\lambda _s|\widehat{s}=0)=e^{\lambda _s}`$ and $`\mathrm{\Gamma }_{1,2}`$ is Gamma distribution with probability density $`P(\lambda _s|\widehat{s}=1)=\lambda _se^{\lambda _s}`$. As a result we have

$$P(\lambda _s|\widehat{x}=1)=\frac{\lambda _s+\lambda _b}{1+\lambda _b}e^{\lambda _s}.$$
(10)
Using formula (2.10) for $`P(\lambda _s|\widehat{x}=1)`$ and formula (2.5) we construct the shortest confidence interval of any confidence level in a trivial way.

In this manner we can construct the distribution of $`P(\lambda _s|\widehat{x})`$ for any values of $`\widehat{x}`$ and $`\lambda _b`$. As a result we have obtained the known formula The formula (2.11) has been derived earlier in ref.  (formula 5.88) in the framework of Bayesian approach and in ref. . We thank Prof. D’Agostini for correspondence..

$$P(\lambda _s|\widehat{x})=\frac{(\lambda _s+\lambda _b)^{\widehat{x}}}{\widehat{x}!{\displaystyle \underset{i=0}{\overset{\widehat{x}}{}}}{\displaystyle \frac{\lambda _b^i}{i!}}}e^{\lambda _s}.$$
(11)
The numerical results for the confidence intervals and for comparison the results of paper  are presented in Table 1 and Table 2.

It should be noted that in our approach the dependence of the width of confidence intervals for parameter $`\lambda _s`$ on the value of $`\lambda _b`$ in the case $`\widehat{x}=0`$ is absent. For $`\widehat{x}=0`$ the method proposed in ref.  also gives a 90% upper limit independent of $`\lambda _b`$. This dependence is absent also in Bayesian approach .

## III Conclusion

The results of construction of frequentist confidence intervals for the parameter $`\lambda _s`$ of Poisson distribution for the signal in the presence of background with known value of parameter $`\lambda _b`$ are presented. It is shown that the described procedure has both Bayesian and frequentist interpretations.

Acknowledgments

We are grateful to V.A. Matveev, V.F. Obraztsov and Fred James for the interest to this work and for valuable comments. We wish to thank S.S. Bityukov, A.V. Dorokhov, V.A. Litvine and V.N. Susoikin for useful discussions. This work has been supported by RFFI grant 99-02-16956 and grant INTAS-CERN 377.


text:
# Fast Approximation of Centrality

## 1 Introduction

In social network analysis, the vertices of a graph represent agents in a group and the edges represent relationships, such as communication or friendship. The idea of applying graph theory to analyze the connection between the structural centrality and group process was introduced by Bavelas . Various measurement of centrality  have been proposed for analyzing communication activity, control, or independence within a social network.

We are particularly interested in closeness centrality , which is used to measure the independence and efficiency of an agent . Beauchamp  defined the closeness centrality of agent $`a_j`$ as

$$\frac{n\mathrm{1}}{_{i=\mathrm{1}}^nd(i,j)}$$

where $`d(i,j)`$ is the distance between agents $`i`$ and $`j`$.111This should be distinguished from another common concept of graph centrality, in which the most central vertices minimize the maximum distance to another vertex. We are interested in computing centrality values for all agents. To compute the centrality for each agent, it is sufficient to solve the all-pairs shortest-paths (APSP) problem. No faster exact method is known.

The APSP problem can be solved by various algorithms in time $`O(nm+n^\mathrm{2}logn)`$ , $`O(n^\mathrm{3})`$ , or more quickly using fast matrix multiplication techniques . Because these results are slow or (with fast matrix multiplication) complicated and impractical, and because recent applications of social network theory to the internet may involve graphs with millions of vertices, it is of interest to consider faster approximations. Aingworth et al.  proposed an algorithm with an additive error of $`\mathrm{2}`$ for the unweighted APSP problem that runs in time $`O(n^{\mathrm{2}.\mathrm{5}}\sqrt{logn})`$. However this is still slow and does not provide a good approximation when the distances are small.

In this paper, we consider a method for fast approximation of centrality. We apply a random sampling technique to approximate the inverse centrality of all vertices in a weighted graph to within an additive error of $`ϵ\mathrm{\Delta }`$ with high probability in time $`O(\frac{logn}{ϵ^\mathrm{2}}(nlogn+m))`$, where $`ϵ`$ is any fixed constant and $`\mathrm{\Delta }`$ is the diameter of the graph.

It has been observed empirically that many social networks exhibit the small world phenomenon : their diameter is bounded by a constant, or, equivalently, the ratio between the minimum and maximum distance is bounded. For such networks, the inverse centrality at any vertex is $`\mathrm{\Omega }(\mathrm{\Delta })`$ and our method provides a near-linear time $`(\mathrm{1}+ϵ)`$-approximation to the centrality of all vertices.

## 2 The Algorithm

We now describe a randomized approximation algorithm RAND for estimating centrality. RAND randomly chooses $`k`$ sample vertices and computes single-source shortest-paths (SSSP) from each sample vertex to all other vertices. The estimated centrality of a vertex is defined in terms of the average distance to the sample vertices.

Algorithm RAND:

1. Let $`k`$ be the number of iterations needed to obtain the desired error bound.
2. In iteration $`i`$, pick vertex $`v_i`$ uniformly at random from $`G`$ and solve the SSSP problem with $`v_i`$ as the source.
3. Let

$$\stackrel{\textcolor[rgb]{1,0,0}{hat}}{c}_u=\mathrm{1}/\underset{i=\mathrm{1}}{\overset{k}{}}\frac{nd(v_i,u)}{k(n\mathrm{1})}$$

be the centrality estimator for vertex $`u`$.

It is not hard to see that, for any $`k`$ and $`u`$, the expected value of $`\mathrm{1}/\stackrel{\textcolor[rgb]{1,0,0}{hat}}{c}_u`$ is equal to $`\mathrm{1}/c_u`$.

###### Lemma 1 (Hoeffding )

If $`x_\mathrm{1},x_\mathrm{2},\mathrm{},x_k`$ are independent, $`a_ix_ib_i`$, and $`\mu =E[x_i/k]`$ is the expected mean, then for $`\xi >\mathrm{0}`$

$$Pr\left\{|\frac{\underset{i=\mathrm{1}}{\overset{k}{}}x_i}{k}\mu |\xi \right\}\mathrm{2}e^{\mathrm{2}k^\mathrm{2}\xi ^\mathrm{2}/_{i=\mathrm{1}}^k(b_ia_i)^\mathrm{2}}.$$

We need to bound the probability that the error in estimating the inverse centrality of any vertex $`u`$ is at most $`\xi `$. This is done by applying Hoeffding’s bound with $`x_i=\frac{d(i,u)n}{(n\mathrm{1})}`$, $`\mu =\frac{\mathrm{1}}{c_u}`$, $`a_i=\mathrm{0}`$, and $`b_i=\frac{n\mathrm{\Delta }}{n\mathrm{1}}`$. Thus the probability that the difference between the estimated inverse centrality $`\mathrm{1}/\stackrel{\textcolor[rgb]{1,0,0}{hat}}{c}_u`$ and the actual inverse centrality $`\mathrm{1}/c_u`$ is more than $`\xi `$ is

$`Pr\left\{|\frac{\mathrm{1}}{\stackrel{\textcolor[rgb]{1,0,0}{hat}}{c}_u}\frac{\mathrm{1}}{c_u}|\xi \right\}`$ $``$ $`\mathrm{2}e^{\mathrm{2}k^\mathrm{2}\xi ^\mathrm{2}/_{i=\mathrm{1}}^k(b_ia_i)^\mathrm{2}}`$
$`=`$ $`\mathrm{2}e^{\mathrm{2}k^\mathrm{2}\xi ^\mathrm{2}/k(\frac{n\mathrm{\Delta }}{n\mathrm{1}})^\mathrm{2}}`$
$`=`$ $`\mathrm{2}e^{\mathrm{\Omega }(k\xi ^\mathrm{2}/\mathrm{\Delta }^\mathrm{2})}`$
For $`\xi =ϵ\mathrm{\Delta }`$, using $`\mathrm{\Theta }(\frac{logn}{ϵ^\mathrm{2}})`$ samples will cause the probability of error at any vertex to be bounded above by e.g. $`\mathrm{1}/n^\mathrm{2}`$, giving at most $`\mathrm{1}/n`$ probability of having greater than $`ϵ\mathrm{\Delta }`$ error anywhere in the graph.

The total running time of algorithm is $`O(km)`$ for unweighted graphs and $`O(k(nlogn+m))`$ for weighted graphs. Thus, for $`k=\mathrm{\Theta }(\frac{logn}{ϵ^\mathrm{2}})`$, we have an $`O(\frac{logn}{ϵ^\mathrm{2}}(nlogn+m))`$ algorithm for approximating centrality within an inverse additive error of $`ϵ\mathrm{\Delta }`$ with high probability.

### Acknowledgements.

We thank Dave Goggin for bringing this problem to our attention, and Lin Freeman for helpful comments on a draft of this paper.


text:
# The Chandra High Energy Transmission Grating Observation of an X-ray Ionization Cone in Markarian 3

## 1 Introduction

The soft X-ray spectrum and the excitation mechanisms responsible for X-ray line emission in Seyfert 2 galaxies have been among the most explored, and arguably, one of the least-understood topics in Seyfert 2 research. While it is generally accepted that a large fraction of the hard X-ray emission, and the high equivalent width iron K line are produced through reflection from a cold, optically-thick medium, the origin of the soft X-ray emission observed in many Seyfert 2 galaxies is poorly understood. In the unified picture of AGNs (Miller & Antonucci 1983; Antonucci & Miller 1985; Antonucci 1993), the soft X-ray spectrum is expected to be dominated by emission and scattering from a medium photoionized by the central continuum radiation. Many Seyfert galaxies, however, harbor regions of intense star formation where soft X-rays are produced through mechanical heating such as shocks generated in young supernova explosions and nuclear jets, which make interpretations in terms of both mechanically heated gas, as well as radiatively heated gas physically plausible. When observed with the moderate spectral resolving power available up to now, the mechanisms underlying the resulting spectra are, in most cases, also spectroscopically indistinguishable.

Mkn 3 is one of the handful of Seyfert 2 galaxies that have been shown to possess broad optical emission lines in polarized light (Miller & Goodrich 1990; Tran 1995). Extensive studies at various wavelength bands have also shown convincing evidence for intense Seyfert activity; the existence of highly collimated bipolar radio jets (Kukula et al. 1993), biconical O \[III\] emission regions (Pogge & De Robertis 1993; Capetti et al. 1995, 1999), hard X-ray emission that shows strong evidence of reflection from the putative molecular torus, and a soft X-ray component that lies significantly above the reflected continuum (Awaki et al. 1991; Iwasawa et al. 1994; Turner et al. 1997; Griffiths et al. 1998; Cappi et al. 1999). The soft X-ray spectrum obtained by ASCA shows numerous discrete features (Iwasawa et al. 1994), which have been interpreted as emission from a photoionized region (Turner et al. 1997), while Griffiths et al. (1998) have demonstrated using non-simultaneous Ginga, ASCA, and ROSAT observations that collisional ionization and photoionization models both provide statistically adequate fits to the X-ray data.

In this Letter we present the first high resolution X-ray spectrum of Mkn 3 obtained with the Chandra HETGS. We show that the X-ray spectral properties of Mkn 3 are qualitatively consistent with those of a typical Seyfert 1 galaxy observed from a different orientation.

## 2 Observation and Data Reduction

Mkn 3 was observed with the Chandra HETGS (Canizares et al. 2000) with the ACIS-S array (Garmire et al. 2000) at the focal plane. The HETGS consists of two separate grating arrays; the Medium Energy Gratings (MEG) and the High Energy Gratings (HEG), which are optimized in the approximate wavelength ranges $`\lambda =525`$ Å and $`\lambda =112`$ Å, respectively. The observation lasted $`100`$ ksec starting at 6:58:08 UT on March 18, 2000. The data were processed through the CXC pipeline software on March 25, 2000. We use sky coordinates of the aspect-corrected Level 2 events to first determine the location of the peak X-ray flux in the zeroth order image, which we define to be the position of the nucleus of Mkn 3.

The zeroth order image of Mkn 3 shows a bright point-like core and a previously unresolved (Morse et al. 1995) faint spatially extended region (FWHM $`2\mathrm{}`$), which lies approximately in the cross dispersion direction of the HETGS (see Figure 1), and is also coincident with the spatial extent of the O \[III\] image. The source is also slightly extended in the dispersion direction with a one-dimensional gaussian FWHM of $`43.9\pm 1.2\mathrm{\mu m}`$ compared to a FWHM $`=37.3\pm 0.3\mathrm{\mu m}`$ derived from a sample of point sources (Dewey 2000, private communication). The observed extent is not an artifact, for example, of an incorrect aspect solution or defocusing of the ACIS-S array, since there are three other sources within $`2\mathrm{}`$ from Mkn 3 that show no evidence for spatial extent. The observed zeroth order count rate of $`0.05\mathrm{counts}\mathrm{s}^1`$ is also too low to produce substantial photon pileup or events that deposit charge on the detector during the 41 msec CCD frame transfer time. We adopt a 1-D gaussian zeroth order profile with FWHM $`=44\mathrm{\mu m}`$ as the line spread function for the dispersed spectrum, which corresponds approximately to $`\mathrm{\Delta }\lambda 0.02`$ Å for the MEG and $`0.01`$ Å for the HEG.

We first removed the background events on ACIS-S4 produced during several serial readout frames using the software written by Houck (2000, private communication), which significantly reduces the noise level on the positive orders of the dispersed spectra. The events were then spatially extracted using an 8-pixel filter ($`4\mathrm{}`$ wide) in the cross-dispersion direction. A second filter was applied in the pulse height-dispersion coordinate space to separate the first order events. Ancillary response files were generated based on our extractions using the Chandra Interactive Analysis of Observations (CIAO) assuming a point source. The nominal effective area may be uncertain by $`10`$% above $`2`$ Å and $`20`$% below $`2`$ Å. Throughout our analysis, we adopt a redshift of $`z=0.013509`$ (Tifft & Cocke 1988) and $`H_0=65\mathrm{km}\mathrm{s}^1\mathrm{Mpc}^1`$, which correspond to a distance to Mkn 3 of $`62\mathrm{Mpc}`$ and an angular distance scale of $`300\mathrm{pc}\mathrm{arcsec}^1`$. A Galactic absorption column density of $`N_H=8.7\times 10^{20}\mathrm{cm}^2`$ (Stark et al. 1992) is assumed throughout the analysis.

## 3 Spectral analysis: X-ray Emission Mechanisms

The dispersed spectrum in the 1 – 23 Å region is shown in Figure 2, where we have combined the plus and minus first orders of the MEG and HEG spectra for display purposes. For all quantitative analyses, the MEG and HEG data are treated separately. Quoted values for the measured wavelengths are corrected for cosmological redshift, and the error values for the line parameters correspond to formal $`1\sigma `$ confidence ranges unless otherwise stated.

The spectrum exhibits clear detections of H- and He-like lines of O, Ne, Mg, Si, S, and Fe, fluorescent lines of Mg, Si, S, and Fe, and a number of Fe L transistions. In the following subsections, we discuss the various emission mechanisms responsible for the observed discrete spectrum, and infer the global characteristics of the circumnuclear emission line regions.

### 3.1 Properties of the Reflection Spectrum

As found in previous observations of Mkn 3 at lower spectral resolution, the HETGS spectrum exhibits a hard, reflection dominated continuum with a prominent near-neutral iron K edge at $`\lambda =1.74\pm 0.05`$ Å ($`E=7.13\pm 20`$ keV), and a bright Fe K fluorescent line (Figure 2). To determine the properties of this fluorescent line, we adopt a hard X-ray continuum model inferred from BeppoSAX observations (Cappi et al. 1999). The HETGS data do not allow us to constrain the relative contributions of the powerlaw and reflection components simultaneously for the photon index, mainly because of limited statistical quality of the data and the high CCD background above the iron K edge. We, therefore, fix those continuum parameters, allowing only the overall normalization to be free. The measured absorption-corrected luminosity between 1 and 1000 Rydbergs is $`L^{\mathrm{intr}}=6.2\times 10^{43}\mathrm{erg}\mathrm{s}^1`$, and indicates that the intrinsic continuum flux has decreased by factor of $`2`$ since the 1997 BeppoSAX observation, but shows no obvious change in spectral shape. The iron K$`\alpha `$ fluorescent line has a centroid of $`\lambda =1.9399\pm 0.0012`$Å ($`E=6.3911\pm 0.0039`$ keV) with a line intensity of $`(4.9\pm 0.5)\times 10^5\mathrm{photons}\mathrm{cm}^2\mathrm{s}^1`$, which is slightly higher than the value obtained by Cappi et al. (1999), but still within the statistical and systematic uncertainties. The width of the line measured from the HEG spectrum is $`\sigma =0.011\pm 0.001`$ Å, and is broader by approximately a factor of two compared to the measured width of the zero order image in the cross dispersion direction. We also detect a Si K$`\alpha `$ fluorescent line at $`\lambda =7.1228\pm 0.030`$ Å ($`E=1.7407\pm 0.0073`$ keV) with a width of $`\sigma =0.008\pm 0.002`$ Å on the MEG, and a line intensity of $`(2.2\pm 0.4)\times 10^6\mathrm{photons}\mathrm{cm}^2\mathrm{s}^1`$. In the absence of a velocity field, the width of the iron K$`\alpha `$ line corresponds to an approximate range in charge state of Fe+ – Fe9+ (Decaux et al. 1995), while, surprisingly, the silicon line appears to be consistent with that from a single charge state; Si+ based on an approximate calculation by Kaastra & Mewe (1993).

### 3.2 The He-like Line Ratio Diagnostics

The MEG spectrum shows fully resolved He-like complexes from Ne and O, and blended complexes from S, Si, and Mg (Figure 2). The measured ratio of the resonance plus intercombination line fluxes to that of the forbidden line of Si XIII is $`(r+i)/f=1.3\pm 0.4`$. This is inconsistent with the value expected for a pure collisionally ionized plasma \[$`(r+i)/f=1.9`$; Mewe, Gronenschild, & van den Oord 1985\], and is only marginally consistent with that expected for a recombination dominated plasma in photoionization equilibrium \[$`(r+i)/f=0.9`$; Liedahl 1999\]. For Mg XI and Ne IX, we are able to obtain only upper limits on the $`i`$ and $`f`$ line fluxes, partly due to blending with iron L lines. The $`r`$ lines, however, are prominent, and can be used along with an estimate for upper limits in the $`f`$ lines to give a lower limit $`(r+i)/f2.7`$ and $`3.9`$ for Mg XI and Ne IX, respectively. These ratios are again inconsistent with pure collisional ionization equilibrium, pure photoionization equilibrium, or any linear combination of the two! On the other hand, the O VII triplet contains a bright $`f`$ line and weak $`i`$ and $`r`$ lines, and the ratio of $`(r+i)/f0.7`$ is consistent with the pure recombination value (Porquet & Dubau 2000). A summary of the measured H- and He-like line properties is given in Table 1.

### 3.3 Fe L Emission via Photoexcitation

Assuming that the line emitting plasma is photoionized, the relative strength of the resonance lines in the He-like triplets can be understood in terms of photoexcitation of resonance transitions by the AGN continuum radiation field. This is further supported by the presence of numerous weak emission lines in the 9 – 16 Å region, most of which coincide with $`3d2p`$ lines of Fe XVII – Fe XXII and $`3p2s`$ lines of Fe XXIII and Fe XXIV, all of which are strong ground-state resonance transitions. The number of counts in each of these lines is low ($`20`$ counts) and prevents us from performing a detailed statistical analysis. However, we can still roughly estimate the line fluxes, which are listed in Table 1.

The iron L lines observed in the spectrum cannot be produced through either electron impact excitation or recombination for the following reasons. For a gas with solar abundances in CIE, iron L-shell emission dominates over K-shell emission from other elements over a wide range of electron temperature ($`0.3kT2`$ keV). In this case, the iron line intensities would be higher than observed by at least an order of magnitude. Although this discrepancy could be accounted for by decreasing the iron abundance, it would make the high-equivalent width ($`EW890`$ eV relative to the reflection continuum) iron fluorescent line, which is roughly consistent with solar abundances, difficult to reconcile.

In a recombination dominated plasma in PIE, the $`3s2p`$ line intensities are much higher than those of the strong resonance $`3d2p`$ lines (Liedahl et al. 1990). The $`3s2p`$ lines, however, are almost completely absent in the spectrum of Mkn 3, which indicates that recombination cascade is also not the dominant excitation mechanism.

The observed resonance iron L lines, therefore, must be produced mostly through photoexcitation of the surrounding material by the primary continuum radiation. The absence of $`3s2p`$ iron lines in the spectrum also indicates that the contribution of X-ray emission from gas in CIE is almost completely negligible.

## 4 The Structure of the Circumnuclear X-ray Emission Regions

We can derive constraints on the density of the circumnuclear environment by a variety of arguments. First, the off-nuclear spectrum exhibits a faint soft X-ray continuum component, which is most likely produced through Thomson scattering of the primary radiation by the surrounding medium. By adopting a photon index of $`\mathrm{\Gamma }=1.8`$, the derived luminosity in this component is $`L^{\mathrm{scat}}2\times 10^{41}\mathrm{erg}\mathrm{s}^1`$ (1 – 1000 Ryd), which is approximately 0.5% of the intrinsic luminosity in the same wavelength range. Since $`L^{\mathrm{scat}}/L^{\mathrm{intr}}=(\mathrm{\Delta }\mathrm{\Omega }/4\pi )\tau _{es}`$, where $`\mathrm{\Delta }\mathrm{\Omega }`$ is the solid angle subtended by the scattering electrons and $`\tau _{es}`$ is the Thomson optical depth through the gas, we can estimate the column density of the electron scattering region to be $`(\mathrm{\Delta }\mathrm{\Omega }/4\pi )\times N_e7.5\times 10^{20}\mathrm{cm}^2`$. Assuming a half-opening angle $`50\mathrm{°}`$ of the bipolar ionization cone (Capetti et al. 1995), this amounts to $`N_e2\times 10^{21}\mathrm{cm}^2`$. We estimate the size of the emission region to be $`1`$ kpc from the zeroth order image, which yields an average electron density of $`1\mathrm{cm}^3`$.

Next, from the measured forbidden line intensity of Si XIII we can estimate the volume ionic emission measure of the Si XIV region ($`EM_{\mathrm{SiXIV}}=n_en_{\mathrm{SiXIV}}𝑑V`$) to be $`1.1\times 10^{59}\mathrm{cm}^3`$. Assuming a stratified conical region, we can write $`EM_{\mathrm{SiXIV}}=\mathrm{\Delta }\mathrm{\Omega }n_en_{\mathrm{SiXIV}}R^2\mathrm{\Delta }R`$, where $`n_e`$ and $`n_{\mathrm{SiXIV}}`$ are the electron and Si XIV number densities, $`R`$ is the mean distance from the X-ray source to the Si XIV region, and $`\mathrm{\Delta }R`$ is the distance through this region. Using $`\tau _{es}`$, which we derived from the scattered continuum, and the size of the X-ray emission region from the zeroth order image ($`1`$ kpc), we estimate the lower limit on the column density through the Si XIV region to be $`N_{\mathrm{SiXIV}}1.4\times 10^{17}\mathrm{cm}^2`$, which corresponds to an optical depth of $`10`$ in the Si XIV Ly$`\alpha `$ line. The measured Si XIV column density, along with the average electron density and the size of the X-ray emission region, implies a lower limit for the Si abundance of $`4\times 10^5`$, which is approximately compatible with the solar photospheric value (Anders & Grevesse 1989).

The derived line optical depth is compatible with the fact that the observed iron resonance line intensities are comparable to the intrinsic monochromatic continuum intensity integrated over a wavelength band corresponding to a velocity range of $`\mathrm{few}100\mathrm{km}\mathrm{s}^1`$. The intrinsic continuum flux as determined from extrapolating the direct highly-absorbed component $`(\mathrm{\Delta }\mathrm{\Omega }/4\pi )\times F_\lambda ^{\mathrm{intr}}\mathrm{\Delta }\lambda `$ between $`\lambda =15.014(1\pm \mathrm{\Delta }v/c)`$ (Fe XVII; a strong resonance line transition, which is nearly unaffected by recombination emission), for example, is $`5.1\times 10^6\mathrm{photons}\mathrm{cm}^2\mathrm{s}^1`$ for a velocity dispersion of $`\mathrm{\Delta }v100\mathrm{km}\mathrm{s}^1`$, which is comparable to the observed line intensity of $`4.2\times 10^6\mathrm{photons}\mathrm{cm}^2\mathrm{s}^1`$. This estimate, therefore, indicates that the line is nearly saturated at the core if observed as type 1 Seyfert.

Optical depths of $`\tau 10`$ in the bright resonance lines imply that both recombination and photoexcitation emission are important in the circumnuclear regions of Mkn 3. However, this requires a rather finely-tuned distribution of gas, which may or may not be common to all Seyfert 2 galaxies. If the optical depths were substantially higher ($`\tau 10`$), recombination would dominate over emission following photoexcitation since the medium becomes optically thick to photoexcitation at a much lower column density than to photoionization. Alternatively, if $`\tau 10`$, only photoexcitation lines will be observed.

Recent Chandra observation of several Seyfert 1 galaxies, however, have revealed narrow resonance absorption lines, many of which are nearly saturated at the line center (Kaastra et al. 2000; Kaspi et al. 2000). In the context of the unified model, these lines are re-emitted isotropically, and should appear as high-equivalent-width emission lines when the direct view of the central nucleus is obscured from the line of sight (Krolik & Kriss 1995). The observed X-ray spectral properties of Mkn 3 fit well into this picture, and suggest that, at least for Mkn 3, we are looking at a Seyfert 1 galaxy from a different orientation.

The authors would like to thank Andrea Prestwich, David Heunemoerder, and the members of the CXC for their help with the CIAO software, and Dan Dewey and Herman Marshall for carefully reading the manuscript and clarifying some of the calibration issues. The authors are also very grateful to Hagai Netzer and an anonymous referee for constructive comments that helped improve the the manuscript significantly. The Columbia University team is supported by several grants from NASA, including a Chandra Guest Investigator grant associated with this observation. D. A. L. was supported in part by a NASA Long Term Space Astrophysics Program grant (S-92654-F). Work at LLNL was performed under the auspices of the U. S. Department of Energy, Contract No. W-7405-Eng-48.