text:
# Removing Distortions from Charge Balance Functions

## I Introduction

Charge balance functions were suggested as a means for addressing fundamental questions concerning hadronization in relativistic heavy ion collisions bassdanpratt . The most pressing issue concerns whether hadronization is delayed in such reactions beyond the characteristic time scale of 1 fm/c, i.e., is a new phase of matter created? A delayed hadronization of a gluon-rich medium would mean that many charge-anticharge pairs would be created late in the reaction and then be more tightly correlated to one another in momentum space. Charge balance functions are designed to identify such charge/anticharge pairs on a statistical basis. Unfortunately, the ability to identify balancing partners is compromised by two effects. First, surplus charge, originating from the non-zero baryon number and charge of the colliding nuclei, pollutes the balance function. Secondly, interactions of a balancing pair with the other charges effectively polarize the other particles and distort the shape of the balance function. In this paper, the magnitude of such distortions are exhibited within the context of simple blast-wave models, and means for eliminating or reducing these distortions are presented.

Charge balance functions are based on conditional distributions,

$`B(P_2|P_1)`$ $``$ $`{\displaystyle \frac{1}{2}}\left\{{\displaystyle \frac{N_+(P_1,P_2)N_{++}(P_1,P_2)}{N_+(P_1)}}+{\displaystyle \frac{N_+(P_1,P_2)N_{}(P_1,P_2)}{N_{}(P_1)}}\right\}.`$ (1)
Here, $`N_{ab}(P_1,P_2)`$ counts the incidences where a particle of charge $`a`$ is observed with momentum in a region defined by $`P_1`$ while a particle of charge $`b`$ is observed that satisfies the momentum constraint $`P_2`$. The second constraint could be any function of the momenta of the two particles, e.g., the relative rapidity. Put into words, the balance function measures the chance of observing an extra particle of opposite charge given the observation of the first particle. Balance functions are related to charge fluctuations which can be used to investigate similar issues jeonpratt ; asakawa ; asakawaprl ; kochpolonica ; kochqm2001 ; bleicherjeonkoch ; jeonkoch ; gavinqm2002 ; pruneaugavinvoloshin ; gavinkapusta . The advantage of balance functions is that they represent a more differential measure.

For a neutral system, every charge has an opposite balancing charge and the balance function would integrate to unity.

$$\underset{P_2}{}B(P_2|P_1)=1.$$
(2)
The normalization is reduced if not all particles carrying the charge are included, e.g. only $`\pi ^+`$ and $`\pi ^{}`$ are evaluated, thus neglecting the chance that the electric charge is balanced by a kaon or a baryon, or that the detector has less than a perfect acceptance. If $`P_2`$ refers to the relative rapidity, and $`P_1`$ includes all measured particles, $`B(P_2=\mathrm{\Delta }Y)`$ provides the probability that a balancing charge was observed with relative rapidity $`\mathrm{\Delta }Y`$. Since much of the charge observed in a relativistic heavy ion collision should be produced at hadronization, a delayed hadronization should result in a tighter space-time correlation between balancing charges. Due to the large collective flow fields in these reactions, a tighter correlation in space-time translates into a tighter correlation between the final momenta. Therefore, a delayed hadronization should be signaled by a narrower balance function when plotted as a function of relative momentum or relative rapidity.

One of the most enticing results from RHIC is the preliminary measurement of balance functions by the STAR collaboration ray\_qm2002star . In accordance with expectations for delayed hadronization, the balance functions appear to narrow with increasing centrality of the collision. However, given the nascent stage of these observations and of the phenomenology, it should be emphasized that numerous questions remain concerning the interpretation of such a measurement. To that end, several issues were pursued in a previous paper, including the effects of Hanbury-Brown Twiss correlations, detector acceptance and the relation to charge fluctuations jeonpratt .

In the same spirit as that paper, more issues will be addressed in this study. In the next section, the benefits analyzing balance functions in other observables, e.g, the invariant relative momentum, will be addressed. In addition to allowing one to analyze the contribution from specific resonances, it will be shown that such observables help clarify other issues such as the interplay of collective flow and cooling.

Balance function analyses are based on the assumption that all charges have balancing partners. This is not true in relativistic heavy ion collisions due to the presence of the initial protons and neutrons which bring about an imbalance of baryon number, electric charge and isospin. In section III, the distorting influence of the surplus positive charge is investigated and a modified balance function observable is proposed that would eliminate such effects.

The subsequent section contains a detailed study of the effects of inter-pair correlations. By extending the model presented in jeonpratt  to balance functions in $`Q_{\mathrm{inv}}`$, it appears that the Hanbury-Brown Twiss (HBT) correlations cause a more noticeable distortion, especially in the most central collisions. The source of these residual effects is analyzed in detail, and the degree to which these distortions can be accounted for is discussed. The final section presents a summary of what further work must be done in analyzing and interpreting this class of observables.

## II Analyzing the Balance Function in $`Q_{\mathrm{inv}}`$

In reference bassdanpratt  balance functions were evaluated as a function of relative rapidity. Like two-particle correlation functions, the balance function is a six-dimensional quantity and new insights can be gained by performing different cuts or binnings. Specifically, we focus on performing analyses in terms of the invariant relative momentum, i.e. the relative momentum as measured by an observer moving with the velocity of the two-particle center of mass. We find that these variables yield clearer insight for interpreting the physics of the balancing charges, as well as providing a better illumination of the distorting effects which are the subject of this study.

The relative momentum of the two particles is defined,

$`q_\alpha `$ $``$ $`(p_{a,\alpha }p_{b,\alpha })P_\alpha {\displaystyle \frac{P(p_ap_b)}{P^2}}`$
$`=`$ $`(p_{a,\alpha }p_{b,\alpha })P_\alpha {\displaystyle \frac{(m_a^2m_b^2)}{s}}.`$
Here, the total momentum of the pair is $`P`$ and the center-of-mass energy of the pair is $`\sqrt{s}=\sqrt{(p_a+p_b)^2}`$. For two particles of the same mass, the last term can be neglected. The invariant momentum is then

$$Q_{\mathrm{inv}}^2=q^2=(p_ap_b)^2+\frac{(m_a^2m_b^2)^2}{P^2}.$$
(4)
For pion-correlation studies, it is conventional to define three projections of the relative momentum, $`Q_{\mathrm{long}}`$, $`Q_{\mathrm{out}}`$ and $`Q_{\mathrm{side}}`$ prattprd86 ; bertschoutlongside ; csorgopratt . These components measure the projections of $`q`$ along the beam axis, the outwards direction (defined by the pair’s transverse momentum) and the sidewards direction (perpendicular to the pair’s transverse momentum and to the beam axis). Motivated by the semi-boost invariant nature of the collision geometry at RHIC, $`Q_{\mathrm{long}}`$ is usually measured in a reference frame moving with the beam velocity of the pair. Although not typically invoked in correlations studies, one can also perform a second outwards boost to a frame where the total spatial momentum of the pair is zero. In this frame the three components, $`Q_{\mathrm{out}}`$, $`Q_{\mathrm{side}}`$ and $`Q_{\mathrm{long}}`$ sum to $`Q_{\mathrm{inv}}`$.

$$Q_{\mathrm{long}}^2+Q_{\mathrm{side}}^2+Q_{\mathrm{out}}^2=Q_{\mathrm{inv}}^2.$$
(5)
In terms of laboratory momenta $`P`$ and $`q`$, these components are:

$`Q_{\mathrm{long}}`$ $`=`$ $`{\displaystyle \frac{1}{\sqrt{s+P_t^2}}}(P_0q_zP_zq_0)`$ (6)
$`Q_{\mathrm{side}}`$ $`=`$ $`{\displaystyle \frac{(P_xq_yP_yq_x)}{P_t}}`$
$`Q_{\mathrm{out}}`$ $`=`$ $`\sqrt{{\displaystyle \frac{s}{s+P_t^2}}}{\displaystyle \frac{(P_xq_x+P_yq_y)}{P_t}}.`$
Here, $`P_t=[(p_{a,x}+p_{b,x})^2+(p_{a,y}+p_{b,y})]^{1/2}`$ is the transverse momentum of the pair. These components differ from the common convention for HBT in that $`Q_{\mathrm{out}}`$ is defined as the relative momentum in the pair frame, whereas in HBT the usual convention is to ignore the second boost which means that the three components do not sum to $`Q_{\mathrm{inv}}`$. In fact, the factor $`\sqrt{(s+P_t^2)/s}`$ in the definition of $`Q_{\mathrm{out}}`$ is simply the Lorentz gamma factor corresponding to the transverse boost to the two-particle rest frame.

Analyzing balance function in terms of $`Q_{\mathrm{inv}}`$ simplifies interpretation with thermal models by eliminating the sensitivity to collective flow. Blast wave models are based on thermal emission from sources which move to account for the collective flow of the exploding matter. Collective flow affects the spectra, but leaves the invariant momentum differences unchanged if the two particles originate from the same space-time point of the blast wave. Hence, plotting the balance function in invariant momentum variables would minimize the confusion associated with the collective flow as the width would only depend on the local thermal properties of the individual sources. If a particle and its balancing particle were always emitted close to one another in coordinate space, the width of the balance function would principally be a function of the breakup temperature with no sensitivity to collective flow, assuming a uniform detector acceptance.

To illustrate the complications of using rapidity differences rather than $`Q_{\mathrm{inv}}`$, one may consider a thermal source where the width in $`Q_{\mathrm{long}}`$ is determined by the temperature. The separation of two tracks in rapidity is then,

$$\mathrm{\Delta }y\frac{Q_{\mathrm{long}}}{m_t},$$
(7)
where $`m_t`$ is the transverse mass of the particles. Since collective flow affects the distribution of transverse masses, the balance function widths for localized thermal sources would depend on the collective flow in the data when plotted in relative rapidity. Although it is easy to account for collective flow in a theoretical model, the interpretation of experimental results is simplified by performing the analysis in $`Q_{\mathrm{inv}}`$.

Furthermore, assuming thermal emission with highly localized charge conservation, the balance function would be isotropic with respect to the direction of the relative momentum, e.g., the width in $`Q_{\mathrm{side}}`$ would equal the width in $`Q_{\mathrm{long}}`$. For early production of charge, one expects string dynamics or diffusion to lead to an anisotropic balance function as the balancing charges should separate significantly in coordinate space along the beam axis due to the extremely large velocity gradient along the beam axis at early times, $`dv_z/dz=1/\tau `$. Thus, in addition to the width of the balance function in $`Q_{\mathrm{inv}}`$, the behavior of the anisotropy as a function of the collision’s centrality provides a crucial test of the mechanism for charge creation and transport.

To illustrate the sensitivity of a balance function in terms of these analyses, we consider a simple blast wave model where the collective transverse motion is assumed to rise linearly with the radius. Of the numerous parameterizations of the blast wave model, it is assumed that the sources have transverse rapidities governed by a simple distribution,

$$\frac{dN}{y_tdy_t}=\{\begin{array}{cc}\mathrm{constant},& y_t<\mathrm{tanh}^1(v_{\mathrm{max}})\\ 0,& y_t>\mathrm{tanh}^1(v_{\mathrm{max}})\end{array}$$
(8)
Here, $`y_t`$ is the transverse rapidity, $`\mathrm{tanh}(y_t)=v_{}`$. The distribution of longitudinal rapidities is assumed to be uniform. For our calculation we assume that these sources emit isotropically in the source frame according to a temperature $`T`$. A balancing positive and negative pion are assumed to be emitted from sources with the same longitudinal and transverse rapidity. Figure 1 illustrates the sensitivity to the temperature by presenting balance functions for three temperatures, 90 MeV, 120 MeV and 150 MeV. The balance function is clearly narrower for lower breakup temperatures. The results of Fig. 1 are insensitive to the choice of $`v_{\mathrm{max}}`$. However, it must be stressed that the sensitivity would return if the balance function is analyzed in a finite acceptance.

The balance function could also be binned in any of the three projections, $`Q_{\mathrm{long}}`$, $`Q_{\mathrm{out}}`$ and $`Q_{\mathrm{side}}`$, rather than in $`Q_{\mathrm{inv}}`$. If the balancing pairs were to always originate from sources with the same collective velocity, the balance function would be identical in all three variables. However, if the balancing particles were to diffuse relative to one another, the shape of the balance function might become decidedly non-isotropic. For instance, if charge is created early in a RHIC collision, the balancing charges might easily separate along the beam axis and ultimately be emitted from regions with different rapidities. Figure 2 presents the widths of balance functions assuming that the balancing particles independently dissipated and were each ultimately emitted with sources moving with a spread of rapidities characterized by $`\sigma _\eta `$. A Gaussian form for the diffusion was assumed for the distribution of source rapidities, $`y_s`$.

$$P(y_s)\mathrm{exp}\left(\frac{y_s^2}{2\sigma _\eta ^2}\right).$$
(9)
This extends the distribution of $`Q_{\mathrm{long}}`$ while leaving the distribution of $`Q_{\mathrm{side}}`$ unaffected and the distribution of $`Q_{\mathrm{out}}`$ only slightly affected by boost effects. As can be seen in Fig. 2, the disparity in the three widths should be easily observed for this example where the temperature was chosen to be 120 MeV and the radial collective velocities were between zero and $`v_{\mathrm{max}}=0.7c`$.

It should be difficult to discern the difference between thermal broadening and dissipation of balancing charges into regions with different collective flow. However, other observables provide insight into breakup temperature, mainly the comparison of proton and pion spectra rhic\_protonpionspectra . Once one knows the breakup temperature, it is possible to fit parameters that describe the diffusive spread, e.g. $`\sigma _\eta `$. Furthermore, a thermal fit to data where the diffusive terms are set to zero provides an upper bound for the breakup temperature.

For the reasons above, much of the analysis of the following sections will be given in $`Q_{\mathrm{inv}}`$. An additional advantage of using $`Q_{\mathrm{inv}}`$ is that it allows one to identify the contributions from specific resonances which contribute peaks to the balance function when plotted in $`Q_{\mathrm{inv}}`$. It is our hope that experimental analyses will also switch to these variables.

## III The effects of surplus positive charge

Not all charges have balancing partners. In a Au+Au collision at RHIC, the two gold nuclei provide 158 unbalanced protons and 236 unbalanced neutrons. These pollute the balance function by providing unbalanced electric charge, baryon number and isospin. For detectors like STAR, these effects are lessened by the fact that most of the surplus charge is at high rapidity and outside the experimental acceptance. However, the effect should become more significant if the balance function is constructed for a set of charges, e.g. $`p\overline{p}`$, for which there is a significant imbalance of one charge vs. the opposite charge. Our goal in this section is to offer a revised procedure for producing balance functions from data that would subtract the pollution due to the surplus charge. More precisely, we wish to define a balance function that would ignore any additional unbalanced charges that are not correlated with one another or with pair-wise created charges.

In order to demonstrate the effects of the polluting surplus charge, we introduce a notation where distributions, $`\overline{N}`$, count charges which are divided into three categories. The subscripts “+” and “-” will refer to positive and negative charges which are created in tandem. The subscripts “$`\delta `$” will denote the surplus positive charge. The balance function will be re-evaluated after inserting the replacements,

$$\begin{array}{cc}\hfill N_{}& \overline{N}_{},\hfill \\ \hfill N_+& \overline{N}_++\overline{N}_\delta ,\hfill \\ \hfill N_{}& \overline{N}_{},\hfill \\ \hfill N_{++}& \overline{N}_{++}+\overline{N}_{\delta +}+\overline{N}_{+\delta }+\overline{N}_{\delta \delta },\hfill \\ \hfill N_+& \overline{N}_++\overline{N}_\delta ,\hfill \\ \hfill N_+& \overline{N}_++\overline{N}_\delta ,\hfill \end{array}$$
(10)
into Eq. (1).

$$\begin{array}{cc}\hfill B(P_2|P_1)=& \frac{(2\overline{N}_+(P_1)+\overline{N}_\delta (P_1))}{2(\overline{N}_+(P_1)+\overline{N}_\delta (P_1))}\frac{\overline{N}_+(P_1,P_2)\overline{N}_{++}(P_1,P_2)}{\overline{N}_+(P_1)}\hfill \\ & +\frac{\overline{N}_\delta (P_1)\overline{N}_{+\delta }(P_1,P_2)\overline{N}_+(P_1)\overline{N}_{\delta \delta }(P_1,P_2)}{2(\overline{N}_+(P_1)+\overline{N}_\delta (P_1))\overline{N}_+(P_1)}.\hfill \end{array}$$
(11)
In deriving Eq. (11) an explicit symmetry between the positive and negative charges has been assumed, i.e., $`\overline{N}_+=\overline{N}_{}`$, $`\overline{N}_{++}=\overline{N}_{}`$, and $`\overline{N}_+=\overline{N}_+`$. The first term in this expression is proportional to the unpolluted balance function, $`\overline{B}`$. The second term can be simplified by assuming that the surplus charges are uncorrelated with the other charges and that they are also uncorrelated with themselves, aside from overall conservation of charge.

$$\overline{N}_+(P_1)\overline{N}_{\delta \delta }(P_1,P_2)=\overline{N}_\delta (P_1)\overline{N}_{\delta +}(P_1,P_2)\frac{Q1}{Q},$$
(12)
where $`Q`$ represents the maximum integrated surplus charge. The balance function can then be expressed as:

$$\begin{array}{cc}\hfill B(P_2|P_1)=& \frac{(2N_+(P_1)+\overline{N}_\delta (P_1))}{2(\overline{N}_+(P_1)+\overline{N}_\delta (P_1))}\overline{B}(P_2|P_1)+\frac{1}{Q1}\frac{\overline{N}_{\delta \delta }(P_1,P_2)}{2(\overline{N}_+(P_1)+\overline{N}_\delta (P_1))},\hfill \\ \hfill \overline{B}(P_2|P_1)& \frac{\overline{N}_+(P_1,P_2)\overline{N}_{++}(P_1,P_2)}{\overline{N}_+(P_1)}.\hfill \end{array}$$
(13)
If the charges used to construct the balance function obey strict charge conservation, a perfect detector would satisfy the normalization conditions,

$$\begin{array}{cc}\hfill \underset{P_2}{}\overline{B}(P_2|P_1)=& 1,\hfill \\ \hfill \underset{P_2}{}\overline{N}_\delta (P_2)=& Q,\hfill \\ \hfill \underset{P_2}{}\overline{N}_{\delta \delta }(P_1,P_2)=& N_\delta (P_1)\frac{Q1}{Q}.\hfill \end{array}$$
(14)
After inserting Eq. (14) into Eq. (13), one can see that the normalization of the balance function is unchanged by the surplus charge. However, the shape is altered as the balance function is comprised of two components. The first term in Eq. (13) describes the separation of balancing charges, while the second term is governed by the separation of two random balancing charges. The relative weights of the two terms is determined by the fraction of the charge which owes itself to a surplus in the initial state. Thus, the effect of the surplus charge is to dampen the contribution from the balancing charges and to average in a second contribution.

For the STAR detector at RHIC, this second term is fairly small even for protons as the number of surplus protons is less than 10 per unit rapidity in central collisions brahms\_jhlee\_qm2002 . Given that charge conservation constraints would suggest $`Q=158`$, the effect of the extra charge is to first dampen the balance function by approximately 15%, and secondly to add in a second component whose width is characteristic of the acceptance, and whose magnitude is only one or two percent of the contribution from balancing charges.

In order to eliminate the contribution from surplus charge and determine $`\overline{B}`$ from experiment, one can consider an object similar as to what is used to create the balance function numerator using mixed events. This object will be referred to as $`M(P_1,P_2)`$ and will be constructed from mixed events, where $`N_{a,b}^m(P_1,P_2)`$ signifies that the charges $`a`$ and $`b`$ which satisfy the momentum constraints $`P_1`$ and $`P_2`$ are chosen from separate events.

$$\begin{array}{cc}\hfill M(P_1,P_2)& N_+^m(P_1,P_2)N_{++}^m(P_1,P_2)+N_+^m(P_1,P_2)N_{}^m(P_1,P_2)\hfill \\ \hfill =& \overline{N}_+^m(P_1,P_2)\overline{N}_{++}^m(P_1,P_2)+\overline{N}_+^m(P_1,P_2)\overline{N}_{}^m(P_1,P_2)\hfill \\ & \overline{N}_{+\delta }^m(P_1,P_2)\overline{N}_{\delta +}^m(P_1,P_2)\overline{N}_{\delta \delta }^m(P_1,P_2)+\overline{N}_\delta ^m(P_1,P_2)+\overline{N}_\delta ^m(P_1,P_2).\hfill \end{array}$$
(15)
Since the counts for different events are independent, $`N_+^m=N_{++}^m=N_+^m=N_{}^m`$, $`N_{\delta +}^m=N_\delta ^m`$ and $`N_{+\delta }^m=N_\delta ^m`$. Thus, $`M`$ becomes

$$M(P_1,P_2)=\overline{N}_{\delta \delta }^m(P_1,P_2).$$
(16)
One could define a similar object using pairs from the same event,

$$\begin{array}{cc}\hfill N(P_1,P_2)& N_+(P_1,P_2)N_{++}(P_1,P_2)+N_+(P_1,P_2)N_{}(P_1,P_2)\hfill \\ \hfill =& \overline{N}_+(P_1,P_2)\overline{N}_{++}(P_1,P_2)+\overline{N}_+(P_1,P_2)\overline{N}_{}(P_1,P_2)\overline{N}_{\delta \delta }(P_1,P_2).\hfill \end{array}$$
(17)
Again if one assumes that the only correlation between surplus charges involves a constraint on the overall number of surplus charges,

$$N(P_1,P_2)=\overline{N}_+(P_1,P_2)\overline{N}_{++}(P_1,P_2)+\overline{N}_+(P_1,P_2)\overline{N}_{}(P_1,P_2)\frac{Q1}{Q}\overline{N}_{\delta \delta }^m(P_1,P_2).$$
(18)
One can then generate the desired balance function $`\overline{B}(P_2|P_1)`$ by combining $`N`$ and $`M`$,

$$\overline{B}(P_2|P_1)=\frac{N(P_1,P_2)M(P_1,P_2)(Q1)/Q}{N_<(P_1)},$$
(19)
where $`N_<`$ is $`N_{}`$ if the surplus charges are positive and is $`N_+`$ if the surplus charges are negative.

It should be emphasized that this derivation assumed that the detector has equal acceptance for positive and negative charges. The ability of $`\overline{B}`$ to ignore the polluting surplus charge is based on the assumption that the surplus charges are uncorrelated with one another and are equally correlated with the “+” and “-” charges. As discussed in the next section and in jeonpratt , such correlations can be important, especially at small relative momentum.

To illustrate the importance of these corrections, we generate a $`p\overline{p}`$ balance function from a simple model of a boost-invariant emission of particles governed by a temperature of 120 MeV and a maximum transverse velocity of 0.7$`c`$. It is assumed that the number of protons per unit rapidity is 28 and that the number of antiprotons is 21 to be consistent with measurements from RHIC brahms\_jhlee\_qm2002 . The polluted balance function as described in Eq. (13) is displayed in Fig. 3 along with the corrected balance function $`\overline{B}`$. This calculation is generated by assuming that particles were emitted from sources with random rapidities, but that two balancing particles are emitted from sources with the same velocity. The parameter $`Q`$ used in Eq. (13) is assumed to be 158.

Two additional modifications have been added to Eq. (13) in order to more fairly illustrate the magnitude of the effect of the surplus charge. First, the function $`\overline{B}`$ was scaled down by 40% to account for the fact that the charge of an antiproton is often balanced by a neutron or by a $`\mathrm{\Lambda }`$. Secondly, the simulated momenta were put through an acceptance filter which crudely mocks the acceptance of the STAR detector at RHIC. Particles were required to have a $`p_t`$ greater than 100 MeV/c and a momentum of magnitude less than 700 MeV/c. The pseudo-rapidities were confined to a region of midrapidity, $`1.1<\eta <1.1`$.

As illustrated in Fig. 3, the effects of the extra charge are mainly to dampen the balance function. The importance of correcting for the surplus charge would certainly be magnified if one were to analyze balance functions from SPS or AGS collisions where the fraction of extra protons is much higher. These corrections are not-model dependent, and the corrected balance functions exactly reproduce $`\overline{B}`$. However, it should be emphasized that this statements relies on the assumption that the surplus charge is uncorrelated with other surplus charges, and with the pair-wise created charges.

## IV Final-State Interaction Distortion to the Balance Function

The balance function is implicitly predicated on the assumption that there are no residual correlations between a given charge and all other charges besides its balancing partner, i.e., all other charges are statistically eliminated from the distribution by the like-sign subtraction. Not all correlations cause problems. For instance, flow correlations tend to be identical between particles of the opposite charge or the same charge and thus fall out of the balance function. On the other hand final-state interactions involve all the other charges and depend sensitively on the relative signs of the charges. This distortion can rise linearly with the multiplicity since the number of charges with which a given charge can correlate rises linearly with the multiplicity. However, correlation functions tend to approach unity at higher multiplicity in accordance with expectations for increasing source size. This makes the resulting multiplicity dependence of the distortion non-trivial.

A method for estimating the distortion to the balance function from residual interactions was provided in jeonpratt . The same method is applied here. For every balancing pair, $`p_a`$ and $`p_b`$, one must consider the correlation weight with other pairs whose momenta are $`p_c`$ and $`p_d`$. The weight, $`w(p_a,p_b;p_c,p_d)`$ can be estimated:

$$w(p_a,p_b;p_c,p_d)C_{++}(p_a,p_c)C_{}(p_b,p_d)C_+(p_a,p_d)C_+(p_b,p_c).$$
(20)
Ideally, the balance function would isolate the $`ab`$ pair and the interaction with the $`cd`$ pair would cancel from the subtraction, $`N_+N_{++}`$. The correlations will lead to distortions if

$$w(p_a,p_b;p_c,p_d)w(p_a,p_b;p_d,p_c).$$
(21)
I.e., distortions are caused only by those interactions which differ between same-sign and opposite-sign particles. For instance, an isoscalar exchange of between pions would not bring on a distortion, but a Coulomb interaction or identical-particle interference would provide a source for distortion.

We simulate these effects for $`\pi ^+\pi ^{}`$ balance functions with the same blast wave model described in Section II. The source of the $`ab`$ pairs was chosen to move with one randomly chosen velocity, while the $`cd`$ source was chosen to move with a different velocity. The distributions were calculated for the balance function numerators using the four particles, but rather than incrementing he distributions by unity, the distributions were incremented by the weight described in Eq. (20). By considering the contributions due to the extra weight separately from the usual contributions arising between the balancing particles, and weighting them appropriately for the given value of $`dn/dy`$, balance functions were calculated with and without the distortions.

In addition to the blast-wave parameters, the residual-interaction distortion is sensitive to the form for the two particle correlations and to the pion multiplicity. The multiplicity of charged pions was chosen to be 300 for both positive and negative pions, roughly consistent with measurements at RHIC rhicpionmultref . The correlation functions were chosen to correspond to Gaussian sources of radius, $`R_{\mathrm{inv}}=6.0`$ fm, again consistent with measurements at RHIC starhbt . A more sophisticated treatment would account for the $`p_t`$ dependence and the directional dependence of the radius. The correlation calculation presented here accounted for both identical-particle interference and for the mutual Coulomb interaction.

The results of the calculation are shown in Fig.s 4 and 5. A crude filter for the STAR detector at RHIC was applied and it was assumed that 70% of the pions had their charge balanced by other pions, which affects the normalization of the balance function.

Residual interactions can either strengthen or diminish the balance function depending on the relative momentum. At very small relative momentum, the balance function at small relative momentum rises due to the Coulomb enhancement of the $`\pi ^+\pi ^{}`$ correlation function and the Coulomb repulsion of the $`\pi ^+\pi +`$ and $`\pi ^{}\pi ^{}`$ correlation functions. For values of $`Q_{\mathrm{inv}}`$ larger than a few MeV/c but less than $`25`$ MeV/c, the identical-particle interference which enhances the $`\pi ^+\pi ^+`$ and $`\pi ^{}\pi ^{}`$ correlation functions, diminishes the balance function since same-sign pairs contribute negatively to the balance function. At larger relative momenta, Coulomb effects again dominate. The effects are less dramatic when the balance function is viewed as a function of relative rapidity.

The distortion of the balance function in Fig. 4 is dominated by Coulomb effects at large momentum. The correlation weights are driven by the squared quantum wave function. However, the correlation for large values of $`qR`$ can be understood by considering the classical analog to the wave function. As shown in Ref. kimpratt , the classical analog is:

$$\begin{array}{cc}\hfill \varphi ^2(q,r)& \frac{d^3q_i}{d^3q_f}=\frac{q_i}{q_f}\hfill \\ \hfill =& \sqrt{18Z_qZ_b\alpha \mu /rq_f^2}\hfill \\ \hfill & 14Z_aZ_b\alpha \mu /rq_f^2,\hfill \end{array}$$
(22)
where $`\alpha `$ is the fine structure constant, the product of the charges of the two species is $`Z_aZ_b`$, $`\mu `$ is the reduced mass and $`q_i`$ and $`q_f=Q_{\mathrm{inv}}`$ are the initial and final relative momenta. Thus, the effects of Coulomb interactions, in the classical limit, only diminish as a function of $`1/Q_{\mathrm{inv}}^2`$. By averaging $`1/r`$ over a Gaussian source characterized by the Gaussian source size $`R`$, one can find the asymptotic form for the classical correlation function.

$$C_{\mathrm{class}}(Q_{\mathrm{inv}})1\frac{4\mu \alpha Z_aZ_b}{Q_{\mathrm{inv}}^2R\sqrt{\pi }}.$$
(23)
The classical result for the $`\pi ^+\pi ^{}`$ correlation function is compared to the quantum result for a six-fm source in Fig. 6. The agreement is remarkable for $`Q_{\mathrm{inv}}>25`$ MeV/c when $`qR>1`$, especially for the opposite-sign case where there is no identical-particle interference.

Even though the correlation function goes to zero proportional to $`1/Q_{\mathrm{inv}}^2`$, the phase space is increasing as $`Q_{\mathrm{inv}}^2`$. Thus, the Coulomb interaction remains important to remarkably large momenta. For more central collisions, the value of $`R`$ rises, but the number of particles with which a given particle is correlated also rises. If the multiplicity scales as $`R^3`$, it is clear that the Coulomb distortion will become acute for central collisions.

Strong-interaction distortions have not been considered in these calculations. In terms of the $`\pi \pi `$ phase shifts, $`\delta _{\mathrm{}}`$, the contribution to the correlation function from strong interactions can be approximated by the relation jenningsboalshillcock ,

$$C(q)\frac{1}{4q^2R^3\sqrt{\pi }}(2\mathrm{}+1)\frac{d\delta _{\mathrm{}}}{dq}.$$
(24)
The strength of the strong-interaction correlation falls much more quickly with $`R`$ than does Coulomb-induced correlation. If $`R^3`$ were to scale linearly with multiplicity, the effect of the strong interaction on the balance function would be roughly independent of multiplicity or centrality. This difference in the behavior derives from the fact that a given pion interacts with only its neighbors through the strong interaction while it may interact with nearly all particles through the Coulomb interaction. If the breakup density is independent of centrality, the number of neighbors stays constant and the distortion to the balance function from strong interactions should not be strongly centrality dependent. On the other hand, the Coulomb distortion interaction should be much stronger for central collisions than for peripheral collisions.

The ingredients for calculating the distortion were the correlation weights and spectra along with the procedure for generating the pairs, $`(p_a,p_b)`$ and $`(p_c,p_d)`$. In principal, the spectra and correlation weights can be taken or inferred from data without introducing a theoretical model. However, the generation of the pairs can not be extracted directly from data due to the correlations between $`p_a`$ and $`p_b`$ and those between $`p_c`$ and $`p_d`$. Since particles are produced pairwise, it is necessary to include these correlations because the inter-pair interaction must attract pairs rather than single particles. I.e., the net charge in the medium can not change, but it can be polarized. At face value, this is an explicit model dependence. However, the parameters that govern the correlation between $`a`$ and $`b`$ and between $`c`$ and $`d`$ are precisely those parameters used to model the undistorted balance function. Thus, no additional model parameters would be introduced to calculate the distortion. Thus, the distortion from residual interactions can not be subtracted from experimental results in a model-independent fashion, but it can be modeled theoretically without additional parameters.

Given the significant effects from inter-pair correlations, it is imperative that the balance function analyses correct for these distortions. Fortunately, the corrections can be confidently modeled, and the robustness of the balance function is not compromised. However, this conclusion is predicated on an understanding of the two-particle correlations. Since a correlation of a fraction of a percent can significantly alter the balance function, the issue of strong-interaction corrections to the balance functions should be revisited.

Strong-interaction effects can be divided into two categories. The first category would be $`s`$-channel interaction which have particle-antiparticle channels, e.g. $`\rho ^0\pi ^+\pi ^{}`$. But, this source should not be considered as a distortion since the two pions are indeed a balancing pair. For instance, if all pions resulted from $`\rho ^0`$ decays, the balance function would peak at the invariant mass of the $`\rho `$, and provide an important clue as to the creation mechanism for pions. Such resonant contributions can be calculated in a microscopic model or in a thermal calculation based on the canonical ensemble. A second source of strong-interaction effects is the interaction with other bodies through non-resonant interactions. Since the strong interaction is short range, this interaction should involve only a few neighbors. For large sources, the Coulomb interaction provides a larger effect on two-particle correlation function than does the strong interaction. Nonetheless, it would be worthwhile to better quantify the significance or insignificance of the strong interaction.

## V Summary and Discussion

Charge balance functions were developed with the hope of identifying balancing charges on a statistical basis. Two effects prevent the like-sign subtraction from accomplishing this goal to high precision. As shown in Sec. III, the excess nucleons coming from the colliding nuclei provide a modest pollution to the balance function in measurements at mid-rapidity at RHIC. Fortunately, these effects can be easily subtracted. The second source of distortion derives from the inter-pair interaction of balancing charges with other particles in the medium. These distortions become more important in high multiplicity events. As shown in Sec. IV, for high multiplicity events these distortions are most strongly affected by the Coulomb interaction. These effects are also more noticeable for balance functions calculated in $`Q_{\mathrm{inv}}`$ than they are for balance functions calculated in relative rapidity. Although it is difficult to subtract these distortions in a model-independent fashion, it is straight-forward to include these effects in a theoretical treatment. In addition to the typical parameters one would use to model balance functions, modeling the distortion requires only an additional understanding of two-particle correlations. As these correlations can be extracted from measurement, the distortion from inter-pair interactions can be modeled quite confidently. In central collisions, this distortion can be a 20% effect, and if the correlation functions are understood to the 90% level, the residual systematic uncertainty is probably of the order of one or two percent.

###### Acknowledgements.

This work was supported by the National Science Foundation, Grant No. PHY-00-70818.


format: text

text:
# Spot foreign exchange market and time series

## I Introduction

A foreign exchange market is an over the counter (OTC) market not subject to any time restriction, in fact, it is open 24 hours a day. Given also that it is the most liquid market in the world and the availability of tick-by-tick quotes, foreign exchange market is very convenient for the study of high frequency behaviors.

Foreign exchange market is made up of about 2000 financial institutions around the globe which operates by selling or buying certain amount of a given currency. A market maker (any of the financial institutions which make the market) is expected to quote simultaneously for his customers both a bid and a ask price at which he is willing to sell and buy a standard amount of a given currency. Each of the major market makers shows a running list of its main bid and ask rates, and those rates are displayed to all market participants. In principle each rate from each market maker is valid until a new rate is displayed by the same market maker. In practice, this is not the case and no information is given about the lifetime of each quote.

In analyzing recorded financial data (Tay, ; Bro+91, ), a difficult and puzzling problem is to define which is the real asset price. In principle, three different quotes for the asset are available: bid, ask and traded price (the price at which the transaction is actually made). Using a wrong definition for asset price can lead to wrong evaluation of price dynamics. For example, if the traded price is used to analyze price dynamics a random zero mean oscillation around the real price will be found at very short time scale.

We analyze the DEM/USD exchange rates taken from Reuters’ EFX pages (the dataset has been provided to us by Olsen & Associates) during a period of one year from January to December 1998. In this period 1,620,843 quotes entries in the EFX system were recorded. The dataset provides a continuously updated sequence of bid and ask exchange rate quotation pairs from individual institutions whose names and locations are also recorded. EFX dataset does not contain any information on traded volume and on the lifetime of quotes. Furthermore EFX quotes are indicative and they do not imply that any amount of currency has been actually traded.

The aim of this work is to find the best definition for the asset price. We start analyzing raw data assuming that the asset price is simply given by spot quotes. We find that this lead to an indeterminacy of asset price at very short time scale and to spurious correlations for returns. We investigate one possible explanation assuming that spot quotes contain an estimation error made by the market maker on the real price. In this way we do not find the real price but then we introduce an algorithm which, reducing the spread between bid and ask quotes, is able to determine the real price and solve the indeterminacy. In the last chapter we use information theory to strengthen our results. The key of our work is that we are able to determine the real price with a parameter free algorithm which uses only the non-arbitrage principle.

## II A naïve approach to the study of FX microstructure

The aim of this section is to show that a naïve approach to the analysis of foreign exchange market may lead to wrong conclusions on price dynamics.

We analyze data taken from EFX Reuters’ information system of DEM/USD exchange quotes of the entire year 1998. In the dataset each bid ad ask quotes as given by the market operators are recorded. The dataset does not contain information on trading prices or on volumes of currencies traded but only tick-by-tick exchange rates. Prices are irregularly time-spaced and we decided, instead of sampling the data in some arbitrarily fixed sampling time, to use business time as our time flow index (see (Ber+03, ) for an exhaustive investigation of the problem). According to our choice $`t`$ takes all integer values up to $`N`$ which is the number of quotes in the dataset.

We indicate with $`S_t^{(a)}`$ and $`S_t^{(b)}`$ respectively bid and ask quotes at time $`t`$. For our analysis we consider spot price as given by the average of bid and ask quotes $`S_t=(S_t^{(a)}+S_t^{(b)})/2`$. We stress that this choice for the spot price is not stringent, the same results can be obtained if bid or ask quotes are used.

We define return at two consecutive business time as:

$$r_t\mathrm{ln}\frac{S_{t+1}}{S_t}$$
(1)
and, in general, returns at time $`t`$ and lag $`\tau `$ as

$$r_t(\tau )\mathrm{ln}\frac{S_{t+\tau }}{S_t}.$$
(2)
We estimated using the above cited dataset the $`\tau `$ dependent variance of returns:

$$<r_t^2(\tau )>,$$
(3)
the neighboring covariance of two consecutive returns after $`\tau `$ lags

$$<r_{t+\tau }(\tau )r_t(\tau )>$$
(4)
and the non-overlapping covariances of returns

$$<r_{t+\tau +s}(\tau )r_t(\tau )>$$
(5)
where $`s1`$. In the three definitions $`<>`$ indicates an average over the probability distribution. Results are shown in figure 1. The variance of returns is a linear function of time lags $`\tau `$, as expected, but it is different from zero in the limit $`\tau 0`$. This imply the existence of an implicit indeterminacy in the price estimation for vanishing time lags. The same indeterminacy is responsible for the negative covariance of two consecutive returns (see below).

In order to explain the previous facts, it has been suggested (Pas+00, ) that the spot price is the composition of two different stochastic processes: a real price change and a noise contribution which is the result of erroneous evaluations of the real price by the market operators.

Given that $`S_t`$ is the spot price at business time $`t`$ we can express the two contributions as:

$$S_t=\stackrel{~}{S}_te^{ϵ_t}$$
(6)
where $`\stackrel{~}{S}_t`$ is the real price and $`ϵ_t`$ is the error contribution to the real price ($`ϵ_t\mathrm{ln}(S_t/\stackrel{~}{S}_t),\stackrel{~}{r}_t=\mathrm{ln}(\stackrel{~}{S}_{t+\tau }/\stackrel{~}{S}_t)`$). The relation between returns is then given by:

$$r_t=\stackrel{~}{r}_tϵ_t+ϵ_{t+1}.$$
(7)
In this framework we can explain the behavior of the variance and of the other quantities reported in figure 1. In fact, with the above definitions, the $`\tau `$ dependent variance can be calculated analytically:

$$<r_t^2(\tau )>=2<ϵ_t^2>+<\stackrel{~}{r}_t^2>\tau .$$
(8)
where it has been assumed that $`ϵ_t`$ and $`\stackrel{~}{r}_t`$ are uncorrelated i.i.d. random variables. The neighboring covariance of two consecutive returns after $`\tau `$ business time

$$<r_{t+\tau }(\tau )r_t(\tau )>=<ϵ_t^2>$$
(9)
and the non-overlapping covariances of returns

$$<r_{t+\tau +s}(\tau )r_t(\tau )>=0$$
(10)
The above picture corresponds exactly to what one can see in figure 1. Therefore, it can be estimated the experimental value for $`<ϵ_t^2>`$ which is $`(2.0\pm 0.2)\times 10^8`$ and $`<\stackrel{~}{r}_t^2>=(0.64\pm 0.05)\times 10^8`$ for the particular dataset analyzed. We stress that equtions 8 and 9 give two independent estimation of the variance allocated in the error contribution. We find that the two values, computed from data of figure 1, coincide within errors.

In order to complete our picture we also estimated the covariance function on time intervals $`\tau `$, defined as

$$<r_{t+\tau }r_t>$$
(11)
where we considered $`<r_t>=0`$. Results are plotted in figure 2. The figure shows that the spot returns are one step negatively correlated ($`<r_{t+1}r_t>=<ϵ_t^2>`$) while for $`\tau >1`$ we have $`<r_{t+\tau }r_t>=0`$ according to previous findings (Jon+98, ).

## III A more realistic approach

The aim of this work is to find a possible algorithm which is able to separate the two contributions in the spot price. The algorithm should be able to solve the indeterminacy found when the spot price is used to analyze high frequency price dynamics. From the previous paragraph we have constraints on the variance allocated in the real price and in the error distribution, the algorithm should then take this constraints into account.

In DEM/USD 1998 dataset, each quote at each business time is associated with the financial institution which fixed that quote. In principle this quote should be valid until the same bank gives a different exchange rate (both for bid and ask prices). In practice between two different quotes from the same bank there are several quotes fixed by other institutions around the world. This suggests that a bank quote elapses after a certain time even if a new quote has not been fixed by the same bank. If the dataset contained information on the time duration of each quote there would be no problem in establishing real price at each time: it would be the best bid and ask quotes valid at that time. But this information is not available and a different strategy has to be found to establish real price at each time.

The algorithm we propose is the following: let us suppose that we are observing the bid and ask price of a given currency and that we are able to detect each quotes from all the financial institution in the business time $`t`$.

We define distance between bid and ask as: $`D_t=S_t^{(b)}S_t^{(a)}`$. Notice that for the non-arbitrage principle this quantity is greater than or equal to zero. Considering $`k`$ time lags previous to business time $`t`$ we consider the following distance:

$$D_{t,k}=\underset{i\{tk,t\}}{\mathrm{min}}S_i^{(b)}\underset{i\{tk,t\}}{\mathrm{max}}S_i^{(a)}.$$
(12)
For each $`t`$ our algorithm find $`\overline{k}`$ which gives $`D_{t,\overline{k}}0`$ and $`D_{t,\overline{k}+1}<0`$. The real price is then given by

$$\stackrel{~}{S}_t=\frac{\left(\mathrm{min}_{i\{t\overline{k},t\}}S_i^{(b)}+\mathrm{max}_{i\{t\overline{k},t\}}S_i^{(a)}\right)}{2}.$$
(13)
In this way we can then define a currency quote at each time. Notice that the number of steps we have to go backwards in time is only given by the non-arbitrage principle and it is different for every $`t`$. Once we have obtained $`\stackrel{~}{S}_t`$ we can define $`\stackrel{~}{r}_t(\tau )=\mathrm{ln}(\stackrel{~}{S}_{t+\tau }/\stackrel{~}{S}_t)`$ and compute all quantities (variances and correlations) already computed for the naïve price definition.

As stated above if our algorithm is correct we should have that the indeterminacy contained in the spot price is removed for the real price. We then replicate the analysis described in the first paragraph for the spot price using the above defined real price $`\stackrel{~}{S}_t`$. Results for this analysis are presented in figure 3. It can be seen that the variance of returns goes to zero when business time goes to zero, in fact the experimental value of $`<ϵ^2>`$ in equation 8 for the real price is $`(3\pm 1)\times 10^{10}`$, two order of magnitude smaller than for the spot price. Also the neighboring covariance of two consecutive returns goes to zero. Another interesting results is that we obtain for the real returns variance a value ($`<\stackrel{~}{r}_t^2>=0.64\times 10^8`$) which is identical, within error, to the one predicted in equation 8.

If we estimate the covariance of returns as defined in equation 11, we obtain that the real price returns are uncorrelated at every step (see figure 2 where covariance is compared with that of ‘naïve returns’ given in equation 11).

The idea we have used here is indeed very simple, we assume that old quotes are still valid until they produce arbitrage. In spite of the simplicity we are able to remove all artifacts in the data.

## IV Information Analysis

To be able to perform information analysis on our dataset first of all we need to code the original data in a sequence of symbols (Bav+01, ). There are several way to build up such a sequence: one should make sure that this treatment does not change to much the structure of the process underlying the evolution of financial data. A partition process of the range of variability of the data is needed in order to assign a conventional symbol to each element of the partition. A symbol corresponds then unambiguously to each element of the partition. The procedure described below permits to code financial data in a sequence of binary symbols from which is then possible to quantify available information.

We fix a resolution value $`\mathrm{\Delta }`$ and define

$$r_{t_i}(\tau )\mathrm{ln}\frac{S_{t_i+\tau }}{S_{t_i}}$$
(14)
where $`t_i`$ is a given business time. We wait until an exit time $`\tau _i`$ such as

$$|r_{t_i}(\tau _i)|\mathrm{\Delta }$$
(15)
In this way we only consider market fluctuations of amplitude $`\mathrm{\Delta }`$. We can build up a sequence of $`r_{t_i}(\tau _i)`$, where $`t_1=t_0+\tau _0`$ and $`t_{i+1}=t_i+\tau _i`$, then we code this sequence in a binary code according to the following rules:

$$c_k=\{\begin{array}{ccc}1\hfill & if\hfill & r_{t_i}(\tau _i)<0\hfill \\ +1\hfill & if\hfill & r_{t_i}(\tau _i)>0\hfill \end{array}$$
(16)
The procedure described above corresponds to a patient investor who waits to update his investing strategy until a certain behavior of the market is achieved, for example, a fluctuation of size $`\mathrm{\Delta }`$.

Once we have build a symbolic sequence we can estimate the entropy which is defined, for a generic sequence of $`n`$ symbols, as:

$$H_n=\underset{C_n}{}p(C_n)\mathrm{ln}p(C_n)$$
(17)
where $`C_n=\{c_1\mathrm{}c_n\}`$ is a sequence of $`n`$ objects and $`p(C_n)`$ its probability. The difference

$$h_nH_{n+1}H_n$$
(18)
represents the average information needed to specify the symbol $`c_{n+1}`$ given the previous knowledge of the sequence $`\{c_1\mathrm{}c_n\}`$.

The series $`h_n`$ is monotonically not increasing and for an ergodic process one has

$$h=\underset{n\mathrm{}}{lim}h_n$$
(19)
where $`h`$ is the Shannon entropy (Sha48, ). It can be shown that if the stochastic process $`\{c_1\mathrm{}c_n\}`$ is markovian of order $`k`$ (i.e. the probability of having $`c_n`$ at time $`n`$ depends only on previous $`k`$ steps $`n1,n2,\mathrm{},nk`$), then $`h_n=h`$ for $`nk`$. In other cases either $`h_n`$ goes to zero for increasing $`n`$, which means that for $`n`$ sufficiently large the $`(n+1)`$th-symbol is predictable knowing the sequence $`C_n`$, or it tends to a positive finite value. The maximum value of $`h`$ is $`\mathrm{ln}(2)`$ for a dichotomic sequence. It occurs if the process has no memory at all and the $`2`$ symbols have the same probability. The difference between $`\mathrm{ln}(2)`$ and $`h`$ is intuitively the quantity of information we may use to predict the next result of the phenomenon we observe, i.e. the market behavior.

In figure 4 $`h_n`$ is estimated both for real ($`\stackrel{~}{S_t}`$) and spot prices ($`S_t`$). From the results it is obvious the different behaviors of the two definition for currency price. In fact while for the spot price we find a non zero available information ($`\mathrm{ln}2h_n0`$), the stochastic process is a Markov process of order 1, the real price does not show this behavior. The available information for the real price is zero and it remains zero at every step (due to the finite number of data we can only estimate $`h_n`$ until $`n9`$ but we can extrapolate its behavior for $`n\mathrm{}`$). This show that the real price (unfortunately) is a stochastic process with no memory and predictability.

## V Conclusions

The aim of this work is to find the exact way to extract real prices from quotes taken form Reuters’ Information system. Our dataset containes 1,620,843 bid and ask DEM/USD quotes recorded during the entire year 1998, from the 1st of January until the 31st of December 1998.

In section 2 we show that a wrong behavior of price dynamics can be obtained when the raw dataset is naïvely processed. In fact, one finds an implicit indeterminacy in price specification which increases the volatility and produces spurious covariances. We then explain this indeterminacy by means of an error contribution which is responsible for the increased volatility and for the covariances.

At this point we introduce a parameter free algorithm, only based on the non arbitrage principle, which is able to extract the real prices from the spot ones. The correctness of the procedure is corroborated by the many results presented in this work. First of all we show that with the new price definition the indeterminacy and the one step anti-correlation drop to zero. We also show, through information analysis, that the stochastic process for the new defined price has no short range memory.

Given our results we think that when studying price dynamics a strong attention has to be posed on the definition of prices to be used in the analysis in order to avoid wrong conclusions as, for example, the existence of short term return correlations.

We stress that we are able to define real prices directly from spot quotes without the need of further information (time of validity of quotes) as one could obtain by means of an electronic broking system (Dan+02, ).

In conclusion we would like to propose our method as a general tool to process raw dataset in order to obtain a new dataset of the same length whose data are a better representation of price evolution in the very short time scale.

## Acknowledgment

We thank Michele Pasquini for illuminating discussions in the early stage of the present work and for continuous interest and suggestions.


text:
# Electronic structure of the V3+ ion in V2O{^∗}₃

## I Introduction

V2O3 attracts the substantial scientific interest by more than 50 years . Despite of it there is still strong discussion about the description of its properties and its electronic structure. There is a long-standing controversy between a S=1 model without an orbital degeneracy  and the $`S`$=1/2 orbitally degenerate model of Castellani et al.. Recently an ”orbitally degenerate spin-1 model for the insulating V2O3” has been proposed in Ref.  whereas spin-1 model with three degenerate orbitals quite recently was worked out by Di Matteo .

In all of these considerations it is agreed that V2O3 is an insulating antiferromagnet with the Neel temperature of 160 K. At that temperature also the low-temperature insulating state transforms to a metallic state without long-range magnetic order. V2O3 has basically the rhombohedral corundum Al2O3 structure. It is agreed that V ions in the corundum structure sit predominantly in the oxygen octahedron with some further distortions, Fig. 1 of Ref. . It is also agreed that the V3+ ion has two d electrons, i.e. that the charge fluctuations are practically absent . The basis for all theories is the description of the V3+ ion and its electronic structure.

The aim of this paper is to point out that the V3+ ion in V2O3 should be described by the quantum numbers $`S`$=1 and $`L`$=3.

## II Theoretical outline

The V3+ ion has two 3$`d`$ electrons. According to us these two electrons form the highly-correlated atomic-like electronic system 3$`d^n`$ ($`n`$=2) that is described by the resultant quantum numbers $`S`$=1 and $`L`$=3. Its electronic structure contains 21 discrete states. According to the Quantum Atomistic Solid State Theory, QUASST, these states are preserved also when the paramagnetic ion becomes the full part of a solid . The resultant quantum numbers $`S`$=1, $`L`$=3 and $`{}_{}{}^{3}F`$ ground term, Fig. 1a, come out from two Hund’s rules (two, i.e. 1o the maximal $`S`$ and 2o the maximal $`L`$ for two $`d`$ electrons). Hund’s rules reflect strong intra-atomic interactions. Thus, the demand for keeping the Hund rules is equivalent to an idea that the paramagnetic atom preserves much of their internal atomic structure being the part of a solid. Such the atomic-like 3$`d^n`$ system interacts with the charge and spin surrounding in the solid. The interaction with the charge surrounding we approximate by means of the crystal-field interactions. The symmetry of the crystal-field interactions depends on the local symmetry and in the corrundum structure is predominantly octahedral. The calculated discrete electronic structure in the octahedral crystal field, Fig. 1b, and in the presence of the intra-atomic spin-orbit coupling is shown in Fig. 1c. To such electronic structure we superimpose the spin-dependent interactions to account for the magnetic state. The self-consistent calculations are performed similarly to that presented in Ref.  for FeBr2. Having the electronic structure, both in magnetic and paramagnetic state, we can calculate the free Helmholtz energy and the resulting thermodynamical properties by means of the statistical physics.

## III Results and discussion

The shown energy level scheme of the 3$`d^2`$ system in the octahedral crystal field and in the presence of the spin-orbit coupling, with the octahedral crystal field dominating the intra-atomic spin-orbit coupling, contains 21 states. As seen from Fig. 1c the dominating octahedral crystal field leaves 9 lowest states well separated from others. These 9 states are spread over 60 meV and their eigenfunctions and energies determine the detailed properties at room and lower temperatures. The properties at zero temperature are determined by the properties of the ground state. The detailed splitting depends on value of the spin-orbit coupling and on the distortions.

The ground state is an accidental non-magnetic doublet. This doublet structure is easily split by means of lattice distortions and/or spin-dependent interactions. They yield a singlet ground state of the V3+ ion in the atomic scale. Despite of the single-ion singlet ground state the magnetism can easily develop as the closely lying states work as a pseudo-doublet. The similar moment-induced mechanism is well known in praseodymium compounds . As the result of local distortions the local V moment can be modelled, both its value and the direction. We get a value of 1.2 $`\mu _B`$ for the V3+-ion magnetic moment in the ordered state at 0 K - this value well reproduces the experimental value. We use the octahedral CEF parameter $`B_4^0`$ = -40 K and the spin-orbit coupling $`\lambda _{so}`$=+150 K. The sign of $`B_4`$ comes out directly from the calculations of the octupolar potential for the octahedral oxygen-anion surroundings.

Our approach yields in the very natural way the insulating ground state. Due to strong correlations all electrons after the charge transfer, from the metal atoms to oxygens, during the formation of the compound, are localized at the oxygens. Within our approach we can understand why the cubic perovskite structure distorts. By the distortion the system gains energy. From 1937, after Jahn and Teller’s work we know that system will spontaneously distort to remove the accidental double degeneracy of the ground state. Our understanding of 3$`d`$-ion compounds is close to an original idea of Van Vleck from 1932, that electronic and magnetic properties are largely determined by the atomic-like electronic structure.

## IV Conclusions

We have attributed magnetism and electronic structure of V2O3 to the V3+ ions. We claim that the V3+ ion in V2O3 should be considered as described by the quantum numbers $`S`$=1 and $`L`$=3. Such quantum numbers result from two Hund’s rules. We are convinced that the orbital degree of freedom, related to the orbital quantum number $`L`$ and the intra-atomic spin-orbit coupling are indispensable for the physically adequate description of electronic and magnetic properties of V2O3. Most up-to-now approaches employ the one-electron $`t_{2g}`$ (ground state) and excited $`e_g`$ orbitals and next consider a molecular V-V unit. Within the Quantum Atomistic Solid-State theory we have shown that the value and the direction of the local magnetic moment is predominantly governed by the local lattice symmetry, e.g. Ref. . We get a value of 1.2 $`\mu _B`$ for the V3+ ion magnetic moment - this value is very sensitive to the local distortions and contains the substantial orbital moment. We are convinced that our description is also useful for the description of the V3+ ions in orthovanades LaVO3 and YVO3 . This paper has been at first rejected due to ”an unusual theoretical concept” in the situation where virtually all other workers in the field over the last twenty years have adopted the V-V molecular unit in the unit cell as a basis for their discussion.” For us, the atomic approach as the start for the analysis of a compound is obvious owing to a presently well-established, but originally very doubtful, an idea of Dalton and Davy that all solids are built from atoms. So different approaches assure the useful discussion and we believe that the publishing of our paper enables the open scientific discussion and allows to solve the problem in the future. As far as correlations are regarding our approach to V2O3 is in the very strongly-correlated limit, though these correlations are primarily on-site and atomic-like. Developing of very different theories, despite of 20 years of studies and in the very last time , we take as indication that there is very urging need for novel theoretical approaches even such ”unusual” as the one presented in this paper. However, we can add that our model provides both the orbital and spin moment . We came out with our approach to 3$`d`$-atom containing compounds in 1996  when the orbital moment was not yet revealed experimentally. Thus, we take the possibility of accounting for the experimentally-revealed orbital moment as the great plus for our theoretical approach. But surely there is still a lot to do in order to describe details of experimental details, but we feel that the atomic-scale properties are essentially important for description of magnetic and electronic properties of 3$`d`$-atom compounds.

* This paper has been submitted 31.05.2002 to Strongly Correlated Electron Conference in Krakow, SCES-02 getting a code MOT026. It has been presented at the Conference but has been rejected with referee’s arguments that ”The authors should make a convincing case for their adoption of a strictly atomic model in the discussion of the physical properties of the V3+ ion in V2O3 when virtually all other workers in the field over the last twenty years have adopted the V-V molecular unit in the unit cell as a basis for their discussion. …. The statements that the V cation is “in the almost perfect oxygen octahedron with some further distortions” and “The symmetry of the crystal field interaction … is predominantly octahedral” and the caption to Fig. 1 are misleading. The oxygen environment is severely distorted, which renders suspect any scheme based on the disposition of atomic states in a perfect octahedral environment.” Our answer of 10.09.2002 ” for us your general objection “why we use the atomic picture” as the start is curious as from two hundred years after Davy, Dalton and others chemists all we know is that a solid is built from atoms. Thus atomic starting point is simply obvious. It is not our problem why other people in the field start in the very different way. Your objection that we imply “a strictly atomic scheme” is not true. Also, that we “take no account of the milieu in which the V3+ ions find themselves in a V2O3 lattice” – is completely misunderstanding of our job. We say just opposite – the milieu, we use a more physical word surroundings (both the charge and spin) is fundamentally important for the realization in a solid of the given atomic-scale ground state and consequently of the whole compound. It is a role of lattice distortions widely discussed by us. In connection to distortions we fully agree that “The oxygen environment is severely distorted” but each consideration in literature starts from the octahedron. Very important is that our electronic structure, shown in Fig. 1c, will be only modified by distortions – the number of states will be preserved. Modification means the removal of degeneracies shown, the change of the energy separations and shape of eigen-functions. Next, our model provides both orbital and spin moment, Refs 8,13. We came out with our approach to 3$`d`$-atom containing compounds in 1996 when the orbital moment was not yet derived experimentally. Thus, we take the possibility of accounting for the orbital moment as the great plus for our theoretical approach.” did not find the understanding of the SCES-02 Committee. Surely, our many-electron CEF electronic structure is completely different from the one-electron crystal-field electronic structure with two electrons put on the t2g orbitals generally discussed in the presently-in-fashion theories of 3$`d`$-atom containing compounds.

The paper has been given under the law and scientific protection of the Rector of the Jagellonian University in Krakow, of University of Mining and Metallurgy and of Polish Academy of Sciences.

Figure caption:

Fig. 1. Electronic structure of the highly-correlated 3$`d^2`$ electronic system occurring in the V3+ ion calculated with the octahedral CEF parameter $`B_4^0`$ = -40 K and the spin-orbit coupling $`\lambda _{so}`$=+150 K. According to the QUASST theory such the electronic structure is expected to be largely preserved in a solid. In real V2O3 this structure is slightly modified by off-octahedral distortions and magnetic interactions.