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The gradient expansion has been a long-standing guide rail in density-functional theory. We here demonstrate that for exchange-correlation approximations that depend on the gradient of the density and the kinetic energy density, i.e., for meta-generalized gradient approximations (meta-GGAs), there is a so far unexploited degree of freedom in the gradient expansion that allows to shift the relative weight of gradient and kinetic energy contributions. As the dependence on the kinetic energy density determines the derivative discontinuity, this allows to construct meta-GGAs that adhere to the known exact constraints, yet have new properties. We demonstrate this with the construction of a meta-GGA that describes both electronic bonds and band gaps with remarkable accuracy.

Based on the Runge-Gross theorem for ensembles we investigate the influence of particle-number-changes on the exchange-correlation potential in time-dependent density-functional theory. We show that the potential changes discontinuously when the particle number crosses an integer value. Real-time simulations of an atomic ionization process demonstrate that this discontinuity appears naturally in the theory of the time-dependent optimized effective potential. The importance of such a discontinuity for physical processes, even such ones in which the particle number is a constant, is discussed.

By solving the time-dependent Schrödinger equation and inverting the time-dependent Kohn-Sham scheme we obtain the exact time-dependent exchange-correlation potential of density-functional theory for the strong-field dynamics of a correlated system. We demonstrate that essential features of the exact exchange-correlation potential can be related to derivative discontinuities in stationary density-functional theory. Incorporating the discontinuity in a time-dependent density-functional calculation greatly improves the description of the ionization process.

The electrical response of molecular chains is dramatically overestimated by local and semilocal density functionals. We show that Kohn-Sham density-functional theory yields accurate linear and nonlinear polarizabilities when the exact exchange energy is employed together with the corresponding exact Kohn-Sham potential upsilonx(r). We further show that approximations to upsilonx(r) that are very accurate for the ground-state energy can nevertheless fail badly for the response because of potential barriers that have little effect on the ground-state energy but strongly affect the electron mobility.

For exchange-correlation functionals that depend explicitly on the Kohn-Sham orbitals, the potential V(xcsigma)(r) must be obtained as the solution of the optimized effective potential (OEP) integral equation. This is very demanding and has limited the use of orbital functionals. We demonstrate that instead the OEP can be obtained iteratively by solving the partial differential equations for the orbital shifts that exactify the Krieger-Li-Iafrate approximation. Unoccupied orbitals do not need to be calculated. Accuracy and efficiency of the method are shown for atoms and clusters using the exact-exchange energy. Counterintuitive asymptotic limits of the exact OEP are presented.