George Papanicolaou

Equity market dynamics are conventionally investigated in name space where stocks are indexed by company names. In contrast, by indexing stocks based on their ranks in capitalization, we gain a different perspective of market dynamics in rank space. Here, we demonstrate the superior performance of statistical arbitrage in rank space over name space, driven by a robust market representation and enhanced mean-reverting properties of residual returns in rank space. Our statistical arbitrage algorithm features an intraday rebalancing mechanism for effective conversion between portfolios in name and rank space. We explore statistical arbitrage with and without neural networks in both name and rank space and show that the portfolios obtained in rank space with neural networks significantly outperform those in name space.

This paper deals with the risk associated with the mis-estimation of mean-reversion of residuals in statistical arbitrage. The main idea in statistical arbitrage is to exploit short-term deviations in returns from a long-term equilibrium across sever

In dealing with high-dimensional data sets, factor models are often useful for dimension reduction. The estimation of factor models has been actively studied in various fields. In the first part of this paper, we present a new approach to estimate high-dimensional factor models, using the empirical spectral density of residuals. The spectrum of covariance matrices from financial data typically exhibits two characteristic aspects: a few spikes and bulk. The former represent factors that mainly drive the features and the latter arises from idiosyncratic noise. Motivated by these two aspects, we consider a minimum distance between two spectrums; one from a covariance structure model and the other from real residuals of financial data that are obtained by subtracting principal components. Our method simultaneously provides estimators of the number of factors and information about correlation structures in residuals. Using free random variable techniques, the proposed algorithm can be implemented and controlled effectively. Monte Carlo simulations confirm that our method is robust to noise or the presence of weak factors. Furthermore, the application to financial time-series shows that our estimators capture essential aspects of market dynamics.

Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the underlying pric

We present a comprehensive study of the resolution and stability properties of sparse promoting optimization theories applied to narrow band array imaging of localized scatterers. We consider homogeneous and heterogeneous media, and multiple and single scattering situations. When the media is homogeneous with strong multiple scattering between scatterers, we give a non-iterative formulation to find the locations and reflectivities of the scatterers from a nonlinear inverse problem in two steps, using either single or multiple illuminations. We further introduce an approach that uses the top singular vectors of the response matrix as optimal illuminations, which improves the robustness of sparse promoting optimization with respect to additive noise. When multiple scattering is negligible, the optimization problem becomes linear and can be reduced to a hybrid- method when optimal illuminations are used. When the media is random, and the interaction with the unknown inhomogeneities can be primarily modeled by wavefront distortions, we address the statistical stability of these methods. We analyze the fluctuations of the images obtained with the hybrid- method, and we show that it is stable with respect to different realizations of the random medium provided the imaging array is large enough. We compare the performance of the hybrid- method in random media to the widely used Kirchhoff migration and the multiple signal classification methods.

We present a comprehensive study of the resolution and stability properties of sparse promoting optimization theories applied to narrow band array imaging of localized scatterers. We consider homogeneous and heterogeneous media, and multiple and single scattering situations. When the media is homogeneous with strong multiple scattering between scatterers, we give a non-iterative formulation to find the locations and reflectivities of the scatterers from a nonlinear inverse problem in two steps, using either single or multiple illuminations. We further introduce an approach that uses the top singular vectors of the response matrix as optimal illuminations, which improves the robustness of sparse promoting optimization with respect to additive noise. When multiple scattering is negligible, the optimization problem becomes linear and can be reduced to a hybrid-$\ell_1$ method when optimal illuminations are used. When the media is random, and the interaction with the unknown inhomogeneities can be primarily modeled by wavefront distortions, we address the statistical stability of these methods. We analyze the fluctuations of the images obtained with the hybrid-$\ell_1$ method, and we show that it is stable with respect to different realizations of the random medium provided the imaging array is large enough. We compare the performance of the hybrid-$\ell_1$ method in random media to the widely used Kirchhoff migration and the multiple signal classification methods.

We propose a new strategy for narrow band, active array imaging of localized scat- terers when only the intensities are recorded and measured at the array. We consider a homogeneous medium so that wave propagation is fully coherent. We show that imaging with intensity-only measurements can be carried out using the time reversal operator of the imaging system, which can be obtained from intensity measurements using an appropriate illumination strategy and the polarization identity. Once the time reversal operator has been obtained, we show that the images can be formed using its singular value decomposition (SVD). We use two SVD-based methods to image the scatterers. The proposed approach is simple and efficient. It does not need prior information about the sought image, and guarantees exact recovery in the noise-free case. Furthermore, it is robust with respect to additive noise. Detailed numerical simulations illustrate the performance of the proposed imaging strategy when only the intensities are captured.