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Markowitz' celebrated optimal portfolio theory generally fails to deliver out-of-sample diversification. In this note, we propose a new portfolio construction strategy based on symmetry arguments only, leading ''Eigenrisk Parity'' portfolios that achieve equal realized risk on all the principal components of the covariance matrix. This holds true for any other definition of uncorrelated factors. We then specialize our general formula to the most agnostic case where the indicators of future returns are assumed to be uncorrelated and of equal variance. This ''Agnostic Risk Parity'' (AGP) portfolio minimizes unknown-unknown risks generated by over-optimistic hedging of the different bets. AGP is shown to fare quite well when applied to standard technical strategies such as trend following.

We explore the effect of past market movements on the instantaneous correlations between assets within the futures market. Quantifying this effect is of interest to estimate and manage the risk associated to portfolios of futures in a non-stationary context. We apply and extend a previously reported method called the Principal Regression Analysis (PRA) to a universe of $84$ futures contracts between $2009$ and $2019$. We show that the past up (resp. down) 10 day trends of a novel predictor -- the eigen-factor -- tend to reduce (resp. increase) instantaneous correlations. We then carry out a multifactor PRA on sectorial predictors corresponding to the four futures sectors (indexes, commodities, bonds and currencies), and show that the effect of past market movements on the future variations of the instantaneous correlations can be decomposed into two significant components. The first component is due to the market movements within the index sector, while the second component is due to the market movements within the bonds sector., Comment: 12 pages, 14 figures, 1 table

We explore the effect of past market movements on the instantaneous correlations between assets within the futures market. Quantifying this effect is of interest to estimate and manage the risk associated to portfolios of futures in a non-stationary context. We apply and extend a previously reported method called the Principal Regression Analysis (PRA) to a universe of 84 futures contracts between 2009 and 2019. We show that the past up (resp. down) 10 day trends of a novel predictor -- the eigen-factor -- tend to reduce (resp. increase) instantaneous correlations. We then carry out a multifactor PRA on sectorial predictors corresponding to the four futures sectors (indexes, commodities, bonds and currencies), and show that the effect of past market movements on the future variations of the instantaneous correlations can be decomposed into two significant components. The first component is due to the market movements within the index sector, while the second component is due to the market movements within the bonds sector.

We consider brane-world scenarios embedded into string theory. We find that the D-brane backreaction induces a large increase in the open string's proper length. Consequently the stringy nature of elementary particles can be detected at distances much larger than the fundamental string scale. As an example, we compute the gravitational potential between two open strings ending on backreacting D3-branes in four-dimensional compactifications of type II string theory. We find that the Newtonian potential receives a correction that goes like 1/r but that is not proportional to the inertial masses of the open strings, implying a violation of the equivalence principle in the effective gravitational theory. This stringy correction is screened by thermal effects when the distance between the strings is greater than the inverse temperature. This suggests new experimental tests for many phenomenological models in type II string theory., Comment: 8 pages, 3 figures

We present a perturbative derivation of the T-system that is believed to encode the exact spectrum of planar = 4 SYM. The T-system is understood as an operator identity between some special line operators, the quantum transfer matrices. By computing the quantum corrections in the process of fusion of transfer matrices, we show that the T-system holds up to first order in a semi-classical expansion. This derivation does not rely on any assumption. We also discuss the extension of the proof to other theories, including models describing string theory on various AdS spaces.

Adaptation is at the heart of sensation and nowhere is it more salient than in early visual processing. Light adaptation in photoreceptors is doubly dynamical: it depends upon the temporal structure of the input and it affects the temporal structure of the response. We introduce a non-linear dynamical adaptation model of photoreceptors. It is simple enough that it can be solved exactly and simulated with ease; analytical and numerical approaches combined provide both intuition on the behavior of dynamical adaptation and quantitative results to be compared with data. Yet the model is rich enough to capture intricate phenomenology. First, we show that it reproduces the known phenomenology of light response and short-term adaptation. Second, we present new recordings and demonstrate that the model reproduces cone response with great precision. Third, we derive a number of predictions on the response of photoreceptors to sophisticated stimuli such as periodic inputs, various forms of flickering inputs, and natural inputs. In particular, we demonstrate that photoreceptors undergo rapid adaptation of response gain and time scale, over ∼ 300 ms—i. e., over the time scale of the response itself—and we confirm this prediction with data. For natural inputs, this fast adaptation can modulate the response gain more than tenfold and is hence physiologically relevant., Author Summary Photoreceptors constitute the interface between the visual world and the cerebral world, as they convert light inputs into neural signals. This conversion is subject to continuous adaptation: response gain and time scale vary as a function of input history. This adaptation is ‘dynamical’ both because it depends upon the temporal structure of the stimulus and because it affects the kinetics of the response. Traditionally, theoretical studies of photoreceptors fall within one of two extreme approaches: either detailed modeling based upon the biophysics of phototransduction or functional modeling based upon phenomenological descriptions of photoreceptor response. While the former approach involves too many coupled equations and unknown parameters to allow for analytical treatments, building intuition, or predicting trends, instances of the latter approach, such as the simple linear-nonlinear model, fail to capture essential features of dynamical adaptation. Here, we develop understanding at an intermediate level. We define and discuss a phenomenological model which is simple enough to allow for full solutions and predictions, but embodies features of phototransduction well enough to capture a rich phenomenology. We demonstrate that our model reproduces data with high accuracy and can be used to make predictions on the response to sophisticated visual inputs such as natural stimuli.

We investigate open string theory on backreacting D3-branes using a spacetime approach. We study in detail the half-BPS supergravity solutions describing open strings ending on D3-branes, in the near horizon of the D3-branes. We recover quantitatively several non-trivial features of open string physics including the appearance of D3-brane spikes, the polarization of fundamental strings into D5-branes, and the Hanany-Witten effect. Finally we detail the computation of the gravitational potential between two open strings, and contrast it with the holographic computation of Wilson lines. We argue that the D-brane backreaction has a large influence on the low-energy gravity, which may lead to experimental tests for string theory brane-world scenarios., 64 pages, 20 figures

We provide a first-principles, perturbative derivation of the AdS5/CFT4 Y-system that has been proposed to solve the spectrum problem of N=4 SYM. The proof relies on the computation of quantum effects in the fusion of some loop operators, namely the transfer matrices. More precisely we show that the leading quantum corrections in the fusion of transfer matrices induce the correct shifts of the spectral parameter in the T-system. As intermediate steps we study UV divergences in line operators up to first order and compute the fusion of line operators up to second order for the pure spinor string in AdS5xS5. We also argue that the derivation can be easily extended to other integrable models, some of which describe string theory on AdS4, AdS3 and AdS2 spacetimes., Comment: 45 pages, 5 figures; v2: minor additions, JHEP version

We study line operators in the two-dimensional sigma-model on PSl(n|n) using the current-current OPEs. We regularize and renormalize these line operators, and compute their fusion up to second order in perturbation theory. In particular we show that the transfer matrix associated to a one-parameter family of flat connections is free of divergences. Moreover this transfer matrix satisfies the Hirota equation (which can be rewritten as a Y-system, or Thermodynamic Bethe Ansatz equations) for all values of the two parameters defining the sigma-model. This provides a first-principles derivation of the Hirota equation which does not rely on the string hypothesis nor on the assumption of quantum integrability., 53 pages, 6 figures. Minor corrections

We argue that gravitational interactions between open strings ending on D3-branes are largely shaped by the D3-branes' backreaction. To this end we consider classical open strings coupled to general relativity in Poincare AdS5 backgrounds. We compute the linear gravitational backreaction of a static string extending up to the Poincare horizon, and deduce the potential energy between two such strings. If spacetime is non-compact, we find that the gravitational potential energy between parallel open strings is independent of the strings' inertial masses and goes like 1/r at large distance r. If the space transverse to the D3-branes is suitably compactified, a collective mode of the graviton propagates usual four-dimensional gravity. In that case the backreaction of the D3-branes induces a correction to the Newtonian potential energy that violates the equivalence principle. The observed enhancement of the gravitational attraction is specific to string theory; there is no similar effect for point-particles., 28 pages, 7 figures. Typos corrected, minor additions

We construct a non-chiral current algebra in two dimensions consistent with conformal invariance. We show that the conformal current algebra is realized in non-linear sigma-models on supergroup manifolds with vanishing dual Coxeter number, with or without a Wess-Zumino term. The current algebra is computed using two distinct methods. First we exploit special algebraic properties of supergroups to compute the exact two- and three-point functions of the currents and from them we infer the current algebra. The algebra is also calculated by using conformal perturbation theory about the Wess-Zumino-Witten point and resumming the perturbation series. We also prove that these models realize a non-chiral Kac-Moody algebra and construct an infinite set of commuting operators that is closed under the action of the Kac-Moody generators. The supergroup models that we consider include models with applications to statistical mechanics, condensed matter and string theory. In particular, our results may help to systematically solve and clarify the quantum integrability of PSU(n|n) models and their cosets, which appear prominently in string worldsheet models on anti-deSitter spaces., Comment: 33 pages, minor corrections

String theory on AdS3 space-times with boundary conditions that allow for black hole states has global asymptotic symmetries which include an infinite dimensional conformal algebra. Using the conformal current algebra for sigma-models on PSU(1,1|2), we explicitly construct the R-symmetry and Virasoro charges in the worldsheet theory describing string theory on AdS3 X S3 with Ramond-Ramond fluxes. We also indicate how to construct the full boundary superconformal algebra. The boundary superconformal algebra plays an important role in classifying the full spectrum of string theory on AdS3 with Ramond-Ramond fluxes, and in the microscopic entropy counting in D1-D5 systems., Comment: 30 pages

We exhibit bound states in the spectrum of non-compact D-branes in N=2 Liouville conformal field theory. We interpret these states in the study of D-branes in the near-horizon limit of Neveu-Schwarz five-branes spread on a topologically trivial circle. We match semi-classical di-electric and repulsion effects with exact conformal field theory results and describe the fate of D-branes hitting NS5-branes. We also show that the bound states can give rise to massless vector and hyper multiplets in a low-energy gauge theory on D-branes deep inside the throat., Comment: 45 pages, 11 figures, references added, JHEP version

Using the pure spinor formalism on the world-sheet, we derive the T-duality rules for all target space couplings in an efficient manner. The world-sheet path integral derivation is a proof of the equivalence of the T-dual Ramond-Ramond backgrounds which is valid non-perturbatively in the string length over the curvature radius and to all orders in perturbation theory in the string coupling., Comment: 7 pages, accepted for publication in PLB

We study non-compact Gepner models that preserve sixteen or eight supercharges in type II string theories. In particular, we develop an orbifolded Landau-Ginzburg description of these models analogous to the Landau-Ginzburg formulation of compact Gepner models. The Landau-Ginzburg description provides an easy and direct access to the geometry of the singularity associated to the non-compact Gepner models. Using these tools, we are able to give an intuitive account of the chiral rings of the models, and of the massless moduli in particular. By studying orbifolds of the singular linear dilaton models, we describe mirror pairs of non-compact Gepner models by suitably adapting the Greene-Plesser construction of mirror pairs for the compact case. For particular models, we take a large level, low curvature limit in which we can analyze corrections to a flat space orbifold approximation of the non-compact Gepner models. This gives rise to a counting of moduli which differs from the toric counting in a subtle way., 44 pages, 11 figures