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# Surface Tension of an Ideal Dielectric-Electrolyte Boundary: Exactly Solvable Model

## 1 Introduction

In a previous paper , the bulk thermodynamic properties (free energy, specific heat, etc…) of the two-dimensional (2D) two-component plasma (with logarithmic interactions), or Coulomb gas, have been obtained exactly in the whole temperature range for which the point-particle model is stable against collapse, i.e., for the dimensionless coupling constant (inverse temperature) $`\beta <2`$. The mapping onto a bulk sine-Gordon field theory was made and recent results about that field theory , , were used. In a next paper , a surface property of the same model in contact with an ideal conductor of dielectric constant $`\mathrm{}`$, impenetrable to particles, was considered. In particular, the surface tension at a rectilinear conductor – Coulomb gas interface was obtained exactly as a function of the bulk density, the applied potential and the temperature. A mapping onto an integrable boundary sine-Gordon theory  with a Dirichlet boundary condition was established, and known results about that field theory , , were used.

The model considered in the present paper is the 2D Coulomb gas in contact with an ideal dielectric wall of dielectric constant $`=0`$. The system is mapped onto an integrable sine-Gordon theory, now with a “free” Neumann boundary condition. Using very recent results on a “reflection” relationship between the boundary Liouville and sine-Gordon theories  \- , an explicit expression is derived for the surface tension at a rectilinear dielectric – Coulomb gas interface as a function of the bulk density, or the fugacity, and the temperature. The surface tension is checked on its high-temperature expansion derived from a renormalized Mayer expansion and on the exact result at the bulk collapse border, the free-fermion point $`\beta =2`$, where it keeps a finite value . The divergency of the surface tension occurs at $`\beta =3`$.

The model under consideration mimics the interface between an electrolyte (the 2D two-component plasma, made of two species of point particles, of opposite charges $`\pm 1`$) and an ideal dielectric wall. Classical equilibrium statistical mechanics is used. In the grand-canonical formalism, the control parameters are the inverse temperature $`\beta `$ and the two fugacities $`z_+`$ and $`z_{}`$ of the positive and negative particles, respectively. Due to the charge neutrality, the bulk properties of the plasma depend only on the combination $`z=(z_+z_{})^{1/2}`$ . It is a specific feature of the present model that also its surface properties depend only on $`z`$.

In the bulk of the plasma, the interaction Boltzmann factor of a positive-negative pair of charges, $`r^\beta `$, is integrable at small $`r`$ if and only if $`\beta <2`$ (at large $`r`$, the interaction is screened), with $`\beta =2`$ being the bulk collapse border of the plasma. In the region $`\beta 2`$, one has to attach to particles a small hard core $`\sigma `$ in order to prevent the collapse. As has been argued long time ago , in the limit $`\sigma 0`$, while the free energy and the internal energy per particle diverge, the specific heat, truncated correlation functions, etc. remain finite. In this sense one should also consider our exact result for the surface tension when $`\beta 2`$. The stability range for surface properties of the model is $`\beta <3`$. The surface collapse at $`\beta =3`$ is identified with the divergency of the surface tension.

Series expansions and exact results are rather rare for the present 2D configuration electrolyte – dielectric wall. More success was attained in the case when the electrolyte is modeled by a one-component plasma, i.e., a system of moving point particles of the same charge embedded in a rigid neutralizing background. The $`\beta 0`$ limit was treated in ref.  and the $`\beta =2`$ free fermion case was solved by Smith  (thermodynamics) and Jancovici  (density profile, pair correlations, sum rules). When the electrolyte is modeled by a two-component plasma, at $`\beta =2`$, the exact solution was available only for a hard wall and an ideal conductor wall , , which admit a Thirring representation with an inhomogeneous mass going to 0 and to $`\mathrm{}`$ within the wall, respectively. Only recently , an exact solution has been obtained also for the dielectric wall of interest by the method of pfaffians, and that solution offers via an explicit density profile a check of the surface tension formula at $`\beta =2`$.

One should emphasize that the present result was obtained due to recent progress in integrable field theories, in particular, a reflection relationship between the boundary Liouville and sine-Gordon theories  \- . Mainly the work , providing an exact formula for the one-point function of an exponential boundary operator in the boundary sine-Gordon model with a general integrable boundary action, was crucial. The surface tension is obtained as a result of an integration from the conductor wall (Dirichlet boundary condition) with a known formula for the surface tension , to the dielectric wall (Neumann boundary condition), via a continuous class of integrable boundary field theories.

The paper is organized as follows. In Section 2, the mapping of the Coulomb gas in contact with an ideal dielectric onto a sine-Gordon field theory with a Neumann boundary condition is made. The reflection relationship between the boundary Liouville and sine-Gordon theories is briefly explained and basic formulae are written down in Section 3. The exact formula for the surface tension is derived in Section 4. Its high temperature expansion and the $`\beta =2`$ solution are checked in Section 5. Concluding remarks about a possible mechanism for the surface collapse are given in Section 6.

## 2 Mapping

We consider an infinite 2D space of points $`\text{r}R^2`$ defined by Cartesian coordinates $`(x,y)`$. The model interface is localized at $`x=0`$, along the $`y`$ axis. The half-space $`x<0`$, impenetrable to particles, is assumed to be occupied by an ideal dielectric of dielectric constant $`=0`$. The electrolyte in the complementary half-space $`x>0`$ is modeled by the classical 2D TCP of point particles $`\{j\}`$ of charge $`\{q_j=\pm 1\}`$, immersed in a homogeneous medium of dielectric constant $`=1`$. Classical equilibrium statistical mechanics is used. In the grand-canonical formalism, the control parameters are the inverse temperature $`\beta `$ and the fugacities $`z_+`$ and $`z_{}`$ of the positive and negative particles, respectively. For the dielectric wall of interest, only strictly neutral charge configurations survive and, therefore, the thermodynamics depends only on $`z=(z_+z_{})^{1/2}`$ as will follow directly from the formalism presented here. Due to the translational invariance in the $`y`$ direction, the particle densities $`n_+(\text{r})=n_{}(\text{r})`$ depend only on $`x`$. Let us denote their asymptotical $`x\mathrm{}`$ values by $`n_+=n_{}=n/2`$ where $`n`$ is the total particle number density.

The interaction energy $`E`$ of particles $`\{q_j,\text{r}_j=(x_j>0,y_j)\}`$ consists of two parts (see, e.g., ),

$$E=\underset{i<j}{}q_iq_jv(|\text{r}_i\text{r}_j|)+\frac{1}{2}\underset{i,j}{}q_iq_jv(|\text{r}_i\text{r}_j^{}|)$$
(1)
where $`\text{r}^{}=(x,y)`$ and $`v(\text{r})=\mathrm{ln}(|r|/r_0)`$ is the 2D Coulomb potential ($`r_0`$ will be set for simplicity to unity). The first term corresponds to direct particle-particle interactions, while the second one to interactions of particles with the images due to the presence of the dielectric wall. Introducing the microscopic charge + image charge density

$$\stackrel{~}{\rho }(\text{r})=\underset{j}{}q_j\left[\delta (xx_j)+\delta (x+x_j)\right]\delta (yy_j)$$
(2)
the energy (1) can be written as

$$E=\frac{1}{4}\mathrm{d}^2r\mathrm{d}^2r^{}\stackrel{~}{\rho }(\text{r})v(\text{r},\text{r}^{})\stackrel{~}{\rho }(\text{r}^{})\frac{1}{2}Nv(0)$$
(3)
where the integrations over r and $`\text{r}^{}`$ are taken over the whole 2D space and $`(N/2)v(0)`$ is the self-energy.

The grand-canonical partition function is defined by

$$\mathrm{\Xi }=\underset{N_+=0}{\overset{\mathrm{}}{}}\underset{N_{}=0}{\overset{\mathrm{}}{}}\frac{z_+^{N_+}}{N_+!}\frac{z_{}^N_{}}{N_{}!}Q(N_+,N_{})$$
(4a)
where
$$Q(N_+,N_{})=\underset{j=1}{\overset{N}{}}\mathrm{d}^2r_j\mathrm{exp}\left[\beta E(\{q_j,\text{r}_j\})\right]$$
(4b)
is the canonical partition function of $`N_+`$ positive and $`N_{}`$ negative charges and $`N=N_++N_{}`$. Since, in infinite space, $`\mathrm{\Delta }/(2\pi )`$ is the inverse operator of $`v(\text{r})`$, the Boltzmann factor of the interaction energy is expressible as

$$\mathrm{exp}\left[\frac{\beta }{4}\mathrm{d}^2r\mathrm{d}^2r^{}\stackrel{~}{\rho }(\text{r})v(\text{r},\text{r}^{})\stackrel{~}{\rho }(\text{r}^{})\right]=\frac{𝒟\varphi \mathrm{exp}\left[\mathrm{d}^2r\left(\frac{1}{2}\varphi \mathrm{\Delta }\varphi +\mathrm{i}\sqrt{\pi \beta }\varphi \stackrel{~}{\rho }\right)\right]}{𝒟\varphi \mathrm{exp}\left(\mathrm{d}^2r\frac{1}{2}\varphi \mathrm{\Delta }\varphi \right)}$$
(5)
where $`\varphi (\text{r})`$ is a real scalar field and $`𝒟\varphi `$ denotes the functional integration over this field. Inserting $`\stackrel{~}{\rho }`$ from (2), one recognizes in the action of the field theory (5) a nonlocal term $`\mathrm{i}\sqrt{\pi \beta }_jq_j[\varphi (x_j,y_j)+\varphi (x_j,y_j)]`$. To make the field theory local, we shall reformulate it as a boundary problem by introducing two new fields

$`\varphi _e(x,y)`$ $`=`$ $`{\displaystyle \frac{1}{\sqrt{2}}}\left[\varphi (x,y)+\varphi (x,y)\right]`$ (6a)
$`\varphi _o(x,y)`$ $`=`$ $`{\displaystyle \frac{1}{\sqrt{2}}}\left[\varphi (x,y)\varphi (x,y)\right]`$ (6b)
defined only in the positive $`x0`$ half-space. The even field has a Neumann boundary condition $`_x\varphi _e|_{x=0}=0`$ and the odd field has a Dirichlet boundary condition $`\varphi _o|_{x=0}=0`$. Since it holds

$$\mathrm{d}^2r\frac{1}{2}\varphi \mathrm{\Delta }\varphi =\frac{1}{2}_{x>0}\mathrm{d}^2r\left(\varphi _e\mathrm{\Delta }\varphi _e+\varphi _o\mathrm{\Delta }\varphi _o\right)$$
(7)
the odd field, contributing only by its free-field part $`\varphi _o\mathrm{\Delta }\varphi _o/2`$, disappears from (5) by the numerator-denominator cancelation. By integration per partes, the term $`\varphi _e\mathrm{\Delta }\varphi _e`$ can be rewritten as $`(\varphi _e)^2`$, with a vanishing contribution from the boundary. The rhs of (5) is thus expressible as

$$\frac{𝒟\varphi _e\mathrm{exp}\left\{_{x>0}\mathrm{d}^2r\left[\frac{1}{2}(\varphi _e)^2\right]+\mathrm{i}\sqrt{2\pi \beta }\underset{j}{}q_j\varphi _e(\text{r}_j)\right\}}{𝒟\varphi _e\mathrm{exp}\left[_{x>0}\mathrm{d}^2r\frac{1}{2}(\varphi _e)^2\right]}$$
(8)
After inserting (8) via (5) into (4), one proceeds along the standard line  and finally expresses $`\mathrm{\Xi }`$ in terms of the 2D Euclidean sine-Gordon theory formulated in the half-space $`x>0`$:

$$\mathrm{\Xi }=\frac{𝒟\varphi \mathrm{exp}\left\{_{x>0}\mathrm{d}^2r\left[\frac{1}{2}(\varphi )^2+2z\mathrm{cos}(\sqrt{2\pi \beta }\varphi )\right]\right\}}{𝒟\varphi \mathrm{exp}\left[_{x>0}\mathrm{d}^2r\frac{1}{2}(\varphi )^2\right]}$$
(9)
with Neumann condition $`_x\varphi (x,y)|_{x=0}=0`$ for the field at the boundary. Here, $`z`$ is the fugacity $`(z_+z_{})^{1/2}`$ renormalized by the self-energy term $`\mathrm{exp}[\beta v(0)/2]`$, and the uniformly shifted $`\varphi _e`$ is renamed as $`\varphi `$,

$$\varphi =\varphi _e+\frac{\mathrm{ln}(z_+/z_{})}{2\mathrm{i}\sqrt{2\pi \beta }}$$
(10)
The dependence of the statistics exclusively on $`(z_+z_{})^{1/2}`$ is now evident. The rescaling of the field $`\varphi \varphi /\sqrt{2\pi }`$ transforms (9) into the form

$$\mathrm{\Xi }(z)=\frac{𝒟\varphi \mathrm{exp}[𝒜_{sG}(z)]}{𝒟\varphi \mathrm{exp}[𝒜_{sG}(z=0)]}$$
(11a)
with the action
$`𝒜_{sG}(z)`$ $`=`$ $`{\displaystyle _{x>0}}\mathrm{d}^2r\left[{\displaystyle \frac{1}{4\pi }}(\varphi )^22z\mathrm{cos}(2b\varphi )\right]`$ (11b)
$`b`$ $`=`$ $`{\displaystyle \frac{1}{2}}\sqrt{\beta }`$ (11c)
and boundary condition $`_x\varphi |_{x=0}=0`$, which is more convenient for our purpose. Hereinafter, the dependence of quantities on the temperature parameter $`b`$ will be omitted in the notation.

The boundary sine-Gordon theory (11) is a member of integrable sine-Gordon theories defined in the half-space $`x>0`$ :

$$\mathrm{\Xi }(z,z_B)=\frac{𝒟\varphi \mathrm{exp}[𝒜_{sG}(z,z_B)]}{𝒟\varphi \mathrm{exp}[𝒜_{sG}(z=0,z_B)]}$$
(12a)
with the action
$$𝒜_{sG}(z,z_B)=_{x>0}\mathrm{d}^2r\left[\frac{1}{4\pi }(\varphi )^22z\mathrm{cos}(2b\varphi )\right]2z_B_{\mathrm{}}^{\mathrm{}}dy\mathrm{cos}(b\varphi _B)$$
(12b)
Here, $`\varphi _B(y)=\varphi (x=0,y)`$ is the boundary field and $`z_B`$ the boundary fugacity. The underlying sine-Gordon theory (11) with Neumann boundary condition $`_x\varphi |_{x=0}=0`$ is known to correspond to the “free” case $`z_B=0`$ (see, e.g., , ). The model of the metal-electrolyte boundary studied in ref.  corresponds to the limit $`z_B\mathrm{}`$, fixing the value of the boundary field $`\varphi |_{x=0}=0`$ (Dirichlet boundary conditions for zero potential difference between the metal and the electrolyte).

The grand potential $`\mathrm{\Omega }=\beta ^1\mathrm{ln}\mathrm{\Xi }(z,z_B)`$ is the sum of a volume part and a surface part:

$$\mathrm{\Omega }=Vp(z)+S\gamma (z,z_B)$$
(13)
where $`p`$ is the bulk pressure, dependent only on $`z`$, and $`\gamma `$ the surface tension, dependent on both $`z`$ and $`z_B`$. For a strip $`L\times R`$, $`R\mathrm{}`$ in the $`y`$ direction and $`L`$ large in the $`x`$ direction, the “specific” $`\mathrm{\Omega }/R`$ is given by

$$\underset{R\mathrm{}}{lim}\frac{\mathrm{\Omega }}{R}=Lp(z)+\gamma (z,z_B)$$
(14)
Thus, with regard to (12) and taking into account the crucial $`z_B`$-independence of $`p`$, one finds

$$\frac{}{z_B}\beta \gamma (z,z_B)=2\left[\mathrm{e}^{\mathrm{i}b\varphi _B}_{z,z_B}\mathrm{e}^{\mathrm{i}b\varphi _B}_{z=0,z_B}\right]$$
(15)
where the obvious symmetry relation

$$\mathrm{e}^{\mathrm{i}b\varphi _B}_{z,z_B}=\mathrm{e}^{\mathrm{i}b\varphi _B}_{z,z_B}$$
(16)
implied by the invariance of the action (12b) with respect to the transformation $`\varphi \varphi `$, was assumed. $`\mathrm{}_{z,z_B}`$ denotes the averaging with the sine-Gordon action (12b).

## 3 Reflection property

The Liouville field theory, formulated in the half-space $`x>0`$ with a conformally invariant condition at $`x=0`$, is defined by the action

$$𝒜_{Liouv}(z,z_B)=_{x>0}\mathrm{d}^2r\left[\frac{1}{4\pi }(\varphi )^2+z\mathrm{e}^{2b\varphi }\right]+z_B_{\mathrm{}}^{\mathrm{}}dy\mathrm{e}^{b\varphi _B}$$
(17)
and the boundary condition on the field $`\varphi `$ at infinity, $`\varphi (x,y)=Q\mathrm{ln}(x^2)+O(1)`$ as $`x\mathrm{}`$. The quantity

$$Q=b+1/b$$
(18)
is called the “background charge”. The two-point function of the exponential of the boundary field behaves like

$$\mathrm{e}^{a\varphi _B(y)}\mathrm{e}^{a\varphi _B(y^{})}_{Liouv}=\frac{d(a|z,z_B)}{|yy^{}|^{2a(Qa)}}$$
(19)
The explicit form of the function $`d`$ was found in ref.

$`d(a|s)`$ $`=`$ $`\left[{\displaystyle \frac{\pi z\mathrm{\Gamma }(b^2)b^{22b^2}}{\mathrm{\Gamma }(1b^2)}}\right]^{(Q2a)/2b}{\displaystyle \frac{G(Q2a)}{G(2aQ)}}`$ (20a)
$`\times \mathrm{exp}\left\{{\displaystyle _{\mathrm{}}^{\mathrm{}}}{\displaystyle \frac{\mathrm{d}t}{t}}\left[{\displaystyle \frac{\mathrm{sinh}[(Q2a)t]\mathrm{cos}^2(st/b)}{\mathrm{sinh}(bt)\mathrm{sinh}(b/t)}}{\displaystyle \frac{(Q2a)}{t}}\right]\right\}`$
$`\mathrm{ln}G(x)`$ $`=`$ $`{\displaystyle _0^{\mathrm{}}}{\displaystyle \frac{\mathrm{d}t}{t}}\left[{\displaystyle \frac{\mathrm{e}^{Qt/2}\mathrm{e}^{xt}}{(1\mathrm{e}^{bt})(1\mathrm{e}^{t/b})}}+{\displaystyle \frac{(Q/2x)^2}{2}}\mathrm{e}^t+{\displaystyle \frac{(Q/2x)}{t}}\right]`$ (20b)
where $`\mathrm{\Gamma }`$ denotes the Gamma function.
The auxiliary variable $`s`$ depends on $`z`$ and $`z_B`$ as follows

$$\mathrm{cosh}^2(\pi s)=\frac{z_B^2}{z}\mathrm{sin}(\pi b^2)$$
(21)
It is either real or pure imaginary. Writing

$$s=u+\mathrm{i}vu,vR$$
(22)
one has namely

$`{\displaystyle \frac{z_B^2}{z}}\mathrm{sin}(\pi b^2)>1`$ $`v=0,u(0,\mathrm{})`$ (23a)
$`{\displaystyle \frac{z_B^2}{z}}\mathrm{sin}(\pi b^2)<1`$ $`u=0,v(0,1/2)`$ (23b)
The function $`d`$ clearly fulfils the unitarity relation

$$d(a|s)d(Qa|s)=1$$
(24)
It is straightforward to show from (19) that the boundary exponential operators exhibit the following reflection property

$$\mathrm{e}^{a\varphi _B}(y)=d(a|s)\mathrm{e}^{(Qa)\varphi _B}(y)$$
(25)
The associated boundary sinh-Gordon model is defined by the action

$$𝒜_{shG}(z,z_B)=_{x>0}\mathrm{d}^2r\left[\frac{1}{4\pi }(\varphi )^2+2z\mathrm{cosh}(2b\varphi )\right]+2z_B_{\mathrm{}}^{\mathrm{}}dy\mathrm{cosh}(b\varphi _B)$$
(26)
The vacuum expectation value $`\mathrm{e}^{a\varphi _B}_{shG}`$ is conjectured  to satisfy a reflection relation similar to (25)

$$\mathrm{e}^{a\varphi _B}_{shG}=d(a|s)\mathrm{e}^{(Qa)\varphi _B}_{shG}$$
(27)
This relation, together with the obvious symmetry

$$\mathrm{e}^{a\varphi _B}_{shG}=\mathrm{e}^{a\varphi _B}_{shG}$$
(28)
determines the expectations up to a periodic function; the solution of interest is a “minimal solution” to the functional equations (27) and (28).

The boundary sine-Gordon model with the action (12b) results as an analytical continuation of (26) via the substitutions $`b\mathrm{i}b,zz,z_Bz_B`$. The final result for $`\mathrm{e}^{\mathrm{i}a\varphi _B}_{sG}\mathrm{e}^{\mathrm{i}a\varphi _B}_{z,z_B}`$ reads \[see eqs. (4.10) and (4.11) of ref. , add a missing factor $`1/2`$ to $`\mathrm{ln}g_S(a)`$\]

$$\mathrm{e}^{\mathrm{i}a\varphi _B}_{z,z_B}=\left[\frac{\pi z\mathrm{\Gamma }(1b^2)}{\mathrm{\Gamma }(b^2)}\right]^{\frac{a^2}{2(1b^2)}}g_0(a)g_S(a)$$
(29)
where

$`\mathrm{ln}g_0(a)`$ $`=`$ $`{\displaystyle _0^{\mathrm{}}}{\displaystyle \frac{\mathrm{d}t}{t}}\left\{{\displaystyle \frac{2\mathrm{sinh}^2(abt)\left[\mathrm{e}^{(1b^2)t/2}\mathrm{cosh}(t/2)\mathrm{cosh}(b^2t/2)1\right]}{\mathrm{sinh}t\mathrm{sinh}(b^2t)\mathrm{sinh}((1b^2)t)}}a^2\mathrm{e}^t\right\}`$ (30a)
$`\mathrm{ln}g_S(a)`$ $`=`$ $`{\displaystyle _0^{\mathrm{}}}{\displaystyle \frac{\mathrm{d}t}{t}}{\displaystyle \frac{2\mathrm{sinh}^2(abt)\mathrm{sin}^2(st)}{\mathrm{sinh}t\mathrm{sinh}(b^2t)\mathrm{sinh}((1b^2)t)}}`$ (30b)
where we have taken into account that $`s^{}=u\mathrm{i}v=\pm s`$. This result holds under the conformal normalization of the bulk and boundary fields corresponding to the short distance asymptotics

$`\mathrm{e}^{2\mathrm{i}a\varphi }(\text{r})\mathrm{e}^{2\mathrm{i}a\varphi }(\text{r}^{})`$ $`=`$ $`{\displaystyle \frac{1}{|\text{r}\text{r}^{}|^{4a^2}}}\mathrm{as}|\text{r}\text{r}^{}|0`$ (31a)
$`\mathrm{e}^{\mathrm{i}a\varphi _B}(y)\mathrm{e}^{\mathrm{i}a\varphi _B}(y^{})`$ $`=`$ $`{\displaystyle \frac{1}{|yy^{}|^{2a^2}}}\mathrm{as}|yy^{}|0`$ (31b)
, . This normalization is consistent with a well known leading short-distance behaviour of the positive-negative pair correlation in the Coulomb gas. For the case of interest $`a=b`$, using the integral representation

$$\mathrm{ln}\mathrm{\Gamma }(x)=_0^{\mathrm{}}\frac{\mathrm{d}t}{t}\mathrm{e}^t\left[x1+\frac{\mathrm{e}^{(x1)t}1}{1\mathrm{e}^t}\right],\mathrm{Re}x>0$$
(32)
one gets after some algebra

$`g_0(b)`$ $`=`$ $`{\displaystyle \frac{1}{2\sqrt{\pi }(1b^2)^2\mathrm{\Gamma }(b^2)}}\mathrm{\Gamma }\left({\displaystyle \frac{12b^2}{22b^2}}\right)\mathrm{\Gamma }\left({\displaystyle \frac{b^2}{22b^2}}\right)`$ (33a)
$`g_S(b)`$ $`=`$ $`(1b^2){\displaystyle \frac{\mathrm{sinh}\left(\frac{\pi s}{1b^2}\right)}{\mathrm{sinh}(\pi s)}}`$ (33b)
With the aid of (21), one then finds

$`\mathrm{e}^{\mathrm{i}b\varphi _B}_{z,z_B}`$ $`=`$ $`{\displaystyle \frac{1}{4\pi ^{3/2}(1b^2)z_B}}\mathrm{\Gamma }\left({\displaystyle \frac{12b^2}{22b^2}}\right)\mathrm{\Gamma }\left({\displaystyle \frac{b^2}{22b^2}}\right)\left[{\displaystyle \frac{2\pi z_B}{\mathrm{\Gamma }(b^2)}}\right]^{1/(1b^2)}`$ (34)
$`\times \left[{\displaystyle \frac{1}{2\mathrm{cosh}(\pi s)}}\right]^{b^2/(1b^2)}{\displaystyle \frac{\mathrm{sinh}\left(\frac{\pi s}{1b^2}\right)}{\mathrm{sinh}(\pi s)}}`$
According to (21), in the limit $`z0`$ the real parameter $`s`$ diverges and (34) yields

$$\mathrm{e}^{\mathrm{i}b\varphi _B}_{z=0,z_B}=\frac{1}{4\pi ^{3/2}(1b^2)z_B}\mathrm{\Gamma }\left(\frac{12b^2}{22b^2}\right)\mathrm{\Gamma }\left(\frac{b^2}{22b^2}\right)\left[\frac{2\pi z_B}{\mathrm{\Gamma }(b^2)}\right]^{1/(1b^2)}$$
(35)
in full agreement with formula (24) in ref. .

## 4 Surface tension

We first summarize the bulk thermodynamics of the 2D Coulomb gas . The pressure is expressible in terms of the soliton mass $`M`$ as follows

$$\beta p=\frac{M^2}{4}\mathrm{tan}\left(\frac{q\pi }{2}\right)$$
(36)
where $`q=\beta /(4\beta )`$. The normalization of the bulk field (31a) fixes the relationship between the fugacity $`z`$ and $`M`$ in the form

$$z=\frac{\mathrm{\Gamma }(q/(q+1))}{\pi \mathrm{\Gamma }(1/(q+1))}\left[M\frac{\sqrt{\pi }\mathrm{\Gamma }((q+1)/2)}{2\mathrm{\Gamma }(q/2)}\right]^{2/(q+1)}$$
(37)
The total particle number density $`n`$, generated via

$$n=z\frac{}{z}\beta p$$
(38)
is related to $`M`$ as follows

$$n=\frac{1}{4}M^2(1+q)\mathrm{tan}\left(\frac{\pi q}{2}\right)$$
(39)
Let us denote the surface tensions of the metal-electrolyte and of the dielectric-electrolyte boundaries by

$`\gamma _{met}`$ $`=`$ $`\underset{z_B\mathrm{}}{lim}\gamma (z,z_B)`$ (40a)
$`\gamma _{diel}`$ $`=`$ $`\underset{z_B0}{lim}\gamma (z,z_B)`$ (40b)
respectively. In paper  \[formula (33b) with zero bulk potential $`\xi =0`$\], we have found

$$\beta \gamma _{met}=\frac{M}{4\mathrm{cos}(q\pi /2)}\left[\mathrm{sin}\left(\frac{q\pi }{2}\right)\mathrm{cos}\left(\frac{q\pi }{2}\right)+1\right]$$
(41)
With regard to the definitions (40) and eq. (15), it holds

$`\beta \gamma _{diel}`$ $`=`$ $`\beta \gamma _{met}{\displaystyle _0^{\mathrm{}}}dz_B{\displaystyle \frac{}{z_B}}\beta \gamma (z,z_B)`$ (42)
$`=`$ $`\beta \gamma _{met}+2{\displaystyle _0^{\mathrm{}}}dz_B\left[\mathrm{e}^{\mathrm{i}b\varphi _B}_{z,z_B}\mathrm{e}^{\mathrm{i}b\varphi _B}_{z=0,z_B}\right]`$
Inserting the previously obtained formulae (34) and (35) into (42) and substituting $`b=\sqrt{\beta }/2`$ in accordance with (11c), one arrives at

$$\beta \gamma _{diel}=\beta \gamma _{met}+\frac{2}{\pi ^{3/2}(4\beta )}\left[\frac{2\pi }{\mathrm{\Gamma }(\beta /4)}\right]^{4/(4\beta )}\mathrm{\Gamma }\left(\frac{2\beta }{4\beta }\right)\mathrm{\Gamma }\left(\frac{\beta }{82\beta }\right)(I_1+I_2)$$
(43)
where

$`I_1`$ $`=`$ $`2\pi \left[{\displaystyle \frac{z}{4\mathrm{sin}(\pi \beta /4)}}\right]^{2/(4\beta )}`$ (44a)
$`\times {\displaystyle _0^{\mathrm{}}}\mathrm{d}u\{\mathrm{sinh}\left({\displaystyle \frac{4\pi u}{4\beta }}\right)\mathrm{sinh}(\pi u)\left[2\mathrm{cosh}(\pi u)\right]^{\beta /(4\beta )}\}`$
$`I_2`$ $`=`$ $`2\pi \left[{\displaystyle \frac{z}{4\mathrm{sin}(\pi \beta /4)}}\right]^{2/(4\beta )}`$ (44b)
$`\times {\displaystyle _0^{1/2}}\mathrm{d}v\{\mathrm{sin}\left({\displaystyle \frac{4\pi v}{4\beta }}\right)\mathrm{sin}(\pi v)\left[2\mathrm{cos}(\pi v)\right]^{\beta /(4\beta )}\}`$
Here, by using eq. (21) we have transformed the integration over $`z_B`$ into integrations over the $`u,v`$-components of the auxiliary variable $`s`$ (22); the split of the integral onto the $`I_1`$ and $`I_2`$ ones is due to the existence of the two regimes (23a) and (23b). Algebra gives

$`I_1`$ $`=`$ $`{\displaystyle \frac{1}{2}}(4\beta )\left[{\displaystyle \frac{z}{4\mathrm{sin}(\pi \beta /4)}}\right]^{2/(4\beta )}\left(2^{\beta /(4\beta )}1\right)`$ (45a)
$`I_2`$ $`=`$ $`{\displaystyle \frac{1}{2}}(4\beta )\left[{\displaystyle \frac{z}{4\mathrm{sin}(\pi \beta /4)}}\right]^{2/(4\beta )}\left[12^{\beta /(4\beta )}\mathrm{cos}\left({\displaystyle \frac{2\pi }{4\beta }}\right)\right]`$ (45b)
Inserting $`I_1`$ and $`I_2`$ into (43), then using (37), applying simple operations with trigonometric functions and formula $`\mathrm{\Gamma }(x)\mathrm{\Gamma }(1x)=\pi /\mathrm{sin}(\pi x)`$ and considering (41), one finally gets

$$\beta \gamma _{diel}=\frac{M}{4\mathrm{cos}(q\pi /2)}\left[\mathrm{sin}\left(\frac{q\pi }{2}\right)+\mathrm{cos}\left(\frac{q\pi }{2}\right)1\right]$$
(46)
where $`q=\beta /(4\beta )`$ and $`M`$ is related to the fugacity $`z`$ by (37).

When $`M`$ is expressed in terms of the particle density $`n`$ by using eq. (39), (46) takes the form

$$\beta \gamma _{diel}=\frac{1}{2}\left[\frac{n(4\beta )}{2\mathrm{sin}(\pi \beta /(4\beta ))}\right]^{1/2}\left[\mathrm{sin}\left(\frac{\pi \beta }{2(4\beta )}\right)+\mathrm{cos}\left(\frac{\pi \beta }{2(4\beta )}\right)1\right]$$
(47)
$`\beta \gamma _{diel}`$ has the small $`\beta `$-expansion

$$\beta \gamma _{diel}=\frac{1}{8}(2\pi \beta n)^{1/2}\left[1\frac{\pi }{16}\beta \frac{\pi }{64}\left(1\frac{\pi }{6}\right)\beta ^2+\mathrm{}\right]$$
(48)
The singular behaviour of $`n`$ as $`\beta 2^{}`$ ($`z`$ fixed) can be deduced from formulae (37) and (39):

$$n\frac{4z^2\pi }{2\beta }$$
(49)
On the other hand, the surface tension, expressed in terms of the fugacity $`z`$, remains finite at the bulk collapse point $`\beta =2`$,

$$\gamma _{diel}=\frac{\pi z}{4},\beta =2$$
(50)
The function $`\beta \gamma _{diel}`$ increases monotonously up to $`\beta =3`$ where the surface tension diverges,

$$\gamma _{diel}\frac{\pi }{12}\left[\frac{\mathrm{\Gamma }(1/4)}{\mathrm{\Gamma }(3/4)}\right]^2\frac{z^2}{3\beta },\beta 3^{}$$
(51)
The singularity prevents from going beyond this point.

## 5 Analytic checks

The surface tension $`\gamma `$ $`(=\gamma _{diel})`$ is the boundary part per unit length of the grand potential $`\mathrm{\Omega }`$. The total number of particles is given by $`N=N_++N_{}=\beta z\mathrm{\Omega }/z`$. The boundary part of this relation is

$$\beta z\frac{\gamma }{z}=_0^{\mathrm{}}dx[n(x)n]$$
(52)
or, since $`zn^{1\beta /4}`$,

$$\beta n\frac{\gamma }{n}=\left(1\frac{\beta }{4}\right)_0^{\mathrm{}}dx[n(x)n]$$
(53)
These formulae will be used for computing the surface tension from the density profile.

### 5.1 High-temperature expansion

As a check of the exact expression (47) for the surface tension, its high-temperature expansion in $`\beta `$, equation (48), can be compared to a direct evaluation of the first two terms of this expansion by using a renormalized Mayer expansion, in close analogy with section 5 of paper ). Since the derivative of the interaction potential $`v(\text{r},\text{r}^{})+v(\text{r}^{},\text{r}^{})`$ with respect to $`x`$ vanishes when point r is on the interface, the same boundary condition holds for the renormalized bond $`K(\text{r},\text{r}^{})`$,

$$\frac{}{x}K(\text{r},\text{r}^{})|_{x=0}=0$$
(54)
After some algebra, one finds

$$_0^{\mathrm{}}dx\left[n(x)n\right]=\frac{(2\pi \beta n)^{1/2}}{16}\left[1\frac{\beta }{4}\left(1+\frac{\pi }{4}\right)+\frac{\beta \pi }{8}+\mathrm{}\right]$$
(55)
Consideration of (55) in (53) gives the final result

$$\beta \gamma =\frac{1}{8}(2\pi \beta n)^{1/2}\left[1\frac{\pi }{16}\beta +O(\beta ^2)\right]$$
(56)
in agreement with (48).

### 5.2 Free fermion $`\beta =2`$ case

Using a Thirring-like representation of the Coulomb gas in presence of a dielectric wall at special inverse temperature $`\beta =2`$, the exact result for the density profile was obtained in the form

$$n_\pm (x)n_\pm =\frac{m^2}{2\pi }K_0(2mx)$$
(57)
where $`m=2\pi z`$ is the rescaled fugacity. Thus,

$$_0^{\mathrm{}}dx[n(x)n]=\frac{\pi z}{2}$$
(58)
Inserting this integral into equation (52), one immediately arrives at the exact formula (50).

## 6 Concluding remarks

A two-dimensional model for the interface, the two-component plasma bounded by a rectilinear ideal dielectric wall, was considered. The surface tension as a function of fugacity is finite at any inverse temperature $`\beta <3`$. In general, the surface properties are supposed to be governed by the particle-image interaction. A particle at distance $`x`$ from the dielectric wall interacts with its own image of the same sign through a repulsive potential $`(1/2)\mathrm{ln}(2x)`$, and the corresponding Boltzmann factor $`(2x)^{\beta /2}`$ is always integrable at small $`x`$, and gives rise to a vanishing particle density at the interface. In spite of this, our exact solution for the surface tension predicts a surface collapse at $`\beta =3`$, identified with the divergence of the surface tension with a characteristic type of short-distance collapse singularity, see formula (51). Such a phenomenon might be explained by recalling an observation of Hansen and Viot  concerning the short-distance behavior of bulk pair distribution functions for two charges of the same, let us say plus, sign. The expected dependence $`g_{++}C_{++}r^\beta `$ as $`r0`$, where the prefactor $`C_{++}`$ is related to a difference of free energies, is changed to $`g_{++}\overline{C}_{++}r^{2\beta }`$ at $`\beta 1`$ as a consequence of the divergence of $`C_{++}`$ at point $`\beta =1`$. The weaking of $`g_{++}`$ at short distance is caused by a pair formation of oppositely charged particles at low temperatures: the neutrality of a pair allows a third particle to approach very close to the pair. For $`\beta 2`$, the strong clustering of positive-negative particles causes an effective short-distance attraction between particles of the same sign. Based on these plausible arguments it is tempting to conjecture that, at $`\beta =3`$, the surface tension diverges due to a paradoxical short-distance collapse of a particle with its own image of the same sign.

## Acknowledgments

I am grateful to Bernard Jancovici for stimulating discussions, useful comments, and careful reading of the manuscript. My stay in LPT Orsay is supported by a NATO fellowship. A partial support by Grant VEGA 2/7174/20 is acknowledged.


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# Multi-dimensional Rational Bubbles and fat tails 11footnote 1We acknowledge helpful discussions and exchanges with J.P. Laurent, T. Lux, V. Pisarenko and M. Taqqu and thank T. Mikosch for providing access to [Le Page, 1983].

## 1 The model of rational bubbles

\[Blanchard, 1979\] and \[Blanchard and Watson, 1982\] originally introduced the model of rational expectations (RE) bubbles to account for the possibility, often discussed in the empirical literature and by practitioners, that observed prices may deviate significantly and over extended time intervals from fundamental prices. While allowing for deviations from fundamental prices, rational bubbles keep a fundamental anchor point of economic modelling, namely that bubbles must obey the condition of rational expectations. In contrast, recent works stress that investors are not fully rational, or have at most bound rationality, and that behavioral and psychological mechanisms, such as herding, may be important in the shaping of market prices \[Thaler, 1993, Shefrin, 2000, Shleifer, 2000\]. However, for fluid assets, dynamic investment strategies rarely perform over simple buy-and-hold strategies \[Malkiel, 1999\], in other words, the market is not far from being efficient and little arbitrage opportunities exist as a result of the constant search for gains by sophisticated investors. Here, we shall work within the conditions of rational expectations and of no-arbitrage condition, taken as useful approximations. Indeed, the rationality of both expectations and behavior often does not imply that the price of an asset be equal to its fundamental value. In other words, there can be rational deviations of the price from this value, called rational bubbles. A rational bubble can arise when the actual market price depends positively on its own expected rate of change, as sometimes occurs in asset markets, which is the mechanism underlying the models of \[Blanchard, 1979\] and \[Blanchard and Watson, 1982\].

In order to avoid the unrealistic picture of ever-increasing deviations from fundamental values, \[Blanchard and Watson, 1982\] proposed a model with periodically collapsing bubbles in which the bubble component of the price follows an exponential explosive path (the price being multiplied by $`a_t=\overline{a}>1`$) with probability $`\pi `$ and collapses to zero (the price being multiplied by $`a_t=0`$) with probability $`1\pi `$. It is clear that, in this model, a bubble has an exponential distribution of lifetimes with a finite average lifetime $`\pi /(1\pi )`$. Bubbles are thus transient phenomena. The condition of rational expectations imposes that $`\overline{a}=1/\delta `$, where $`\delta `$ is the inverse of the discount factor. In order to allow for the start of new bubbles after the collapse, a stochastic zero mean normally distributed component $`b_t`$ is added to the systematic part of $`B_t`$. This leads to the following dynamical equation

$$X_{t+1}=a_tX_t+b_t,$$
(1)
where, as we said, $`a_t=\overline{a}`$ with probability $`\pi `$ and $`a_t=0`$ with probability $`1\pi `$. There is a huge literature on theoretical refinements of this model and on the empirical detectability of RE bubbles in financial data (see \[Camerer, 1989\] and \[Adam and Szafarz, 1992\], for surveys of this literature).

Recently, \[Lux and Sornette, 1999\] studied the implications of the RE bubble models for the unconditional distribution of prices, price changes and returns resulting from a more general discrete-time formulation extending (1) by allowing the multiplicative factor $`a_t`$ to take arbitrary values and be i.i.d. random variables drawn from some non-degenerate probability density function (pdf) $`P_a(a)`$. The model can also be generalized by considering non-normal realizations of $`b_t`$ with distribution $`P_b(b)`$ with $`\mathrm{E}[\mathrm{b}_\mathrm{t}]=0`$, where $`\mathrm{E}[]`$ is the expectation operator. Since in (1) the bubble $`X_t`$ denotes the difference between the observed price and the fundamental price, the “bubble” regimes refer to the cases when $`X_t`$ explodes exponentially under the action of successive multiplications by factor $`a_t,a_{t+1},\mathrm{}`$ with a majority of them larger than $`1`$ but different, thus adding a stochastic component to the standard model of \[Blanchard and Watson, 1982\].

Provided $`\mathrm{E}[\mathrm{ln}\mathrm{a}]<0`$ (stationarity condition) and if there is a number $`\mu `$ such that $`0<\mathrm{E}[|\mathrm{b}|^\mu ]<+\mathrm{}`$, such that

$$\mathrm{E}[|\mathrm{a}|^\mu ]=1$$
(2)
and such that $`\mathrm{E}[|\mathrm{a}|^\mu \mathrm{ln}|\mathrm{a}|]<+\mathrm{}`$, then the tail of the distribution of $`B`$ is asymptotically (for large $`X`$’s) a power law \[Kesten, 1973, Goldie, 1991\]

$$P_X(X)dX\frac{C}{|X|^{1+\mu }}dX,$$
(3)
with an exponent $`\mu `$ given by the real positive solution of (2). Rational expectations require in addition that the bubble component of asset prices obeys the “no free-lunch” condition

$$\delta \mathrm{E}[\mathrm{X}_{\mathrm{t}+1}]=\mathrm{X}_\mathrm{t}$$
(4)
where $`\delta `$ is the discount factor $`<1`$. Condition (4) with (1) imposes the condition

$$\mathrm{E}[\mathrm{a}]=1/\delta >1,$$
(5)
on the distribution of the multiplicative factors $`a_t`$. Since the function $`\mathrm{E}[|\mathrm{a}|^\mu ]`$ is convex, \[Lux and Sornette, 1999\] showed that this automatically enforces $`\mu <1`$. It is easy to show that the distribution of price differences has the same power law tail with the exponent $`\mu <1`$ and the distribution of returns is dominated by the same power-law over an extended range of large returns \[Lux and Sornette, 1999\]. Although power-law tails are a pervasive feature of empirical data, these characterizations are in strong disagreement with the usual empirical estimates which find $`\mu 3`$ \[de Vries, 1994, Lux, 1996, Pagan, Guillaume et al., 1997, Gopikrishnan et al., 1998\]. \[Lux and Sornette, 1999\] concluded that exogenous rational bubbles are thus hardly reconcilable with some of the stylized facts of financial data at a very elementary level.

## 2 Generalization of rational bubbles to arbitrary dimensions

### 2.1 Introduction

In reality, there is no such thing as an isolated asset. Stock markets exhibit a variety of inter-dependences, based in part on the mutual influences between the USA, European and Japanese markets. In addition, individual stocks may be sensitive to the behavior of the specific industry as a whole to which they belong and to a few other indicators, such as the main indices, interest rates and so on. \[Mantegna, 1999, Bonanno, Lillo and Mantegna, 2001\] have indeed shown the existence of a hierarchical organization of stock interdepences. Furthermore, bubbles often appear to be not isolated features of a set of markets. For instance, \[Flood et al., 1984\] tested whether a bubble simultaneously existed across the nations, such as Germany, Poland, and Hungary, that experienced hyperinflation in the early 1920s. Coordinated bubbles can sometimes be detected. One of the most prominent example is found in the market appreciations observes in many of the world markets prior to the world market crash in Oct. 1987 \[Barro et al., 1989\]. Similar intermittent coordination of bubbles have been detected among the significant bubbles followed by large crashes or severe corrections in Latin-American and Asian stock markets \[Johansen and Sornette, 2000\]. It is therefore desirable to generalize the one-dimensional RE bubble model (1) to the multi-dimensional case. One could also hope a priori that this generalization would modify the result $`\mu <1`$ obtained in the one-dimensional case and allow for a better adequation with empirical results. As we shall show, this turns out to be ill-born for reasons that we shall explain in details.

The simplest such generalization is to consider two assets $`X`$ and $`Y`$ with prices respectively equal to $`X_t`$ and $`Y_t`$ at time $`t`$, evolving according to

$$X_{t+1}=a_tX_t+b_tY_t+\eta _t$$
(6)
$$Y_{t+1}=c_tX_t+d_tY_k+ϵ_t$$
(7)
where $`a_t`$, $`b_t`$, $`c_t`$ and $`d_t`$ are drawn from some multivariate probability density function. The two additive noises $`\eta _t`$ and $`ϵ_t`$ are also drawn from some distribution function with zero mean. The diagonal case $`b_t=c_t=0`$ for all $`t`$ recovers the previous one-dimensional case with two uncoupled bubbles, provided $`\eta _t`$ and $`ϵ_t`$ are independent.

Rational expectations require that $`X_t`$ and $`Y_t`$ obey both the “no-free lunch” condition (4), i.e., $`\delta \mathrm{E}[\mathrm{X}_{\mathrm{t}+1}]=\mathrm{X}_\mathrm{t}`$ and $`\delta \mathrm{E}[\mathrm{Y}_{\mathrm{t}+1}]=\mathrm{Y}_\mathrm{t}`$. With (6,7), this gives

$`\left(\mathrm{E}[\mathrm{a}_\mathrm{t}]\delta ^1\right)X_t+\mathrm{E}[\mathrm{b}_\mathrm{t}]\mathrm{Y}_\mathrm{t}`$ $`=`$ $`0,`$ (8)
$`\mathrm{E}[\mathrm{c}_\mathrm{t}]\mathrm{X}_\mathrm{t}+\left(\mathrm{E}[\mathrm{d}_\mathrm{t}]\delta ^1\right)\mathrm{Y}_\mathrm{t}`$ $`=`$ $`0,`$ (9)
where we have used $`\mathrm{E}[\eta _\mathrm{t}]=\mathrm{E}[ϵ_\mathrm{t}]=0`$. The two equations (8,9) must be true for all times, i.e. for all values of $`X_t`$ and $`Y_t`$ visited by the dynamics. This imposes $`\mathrm{E}[\mathrm{b}_\mathrm{t}]=\mathrm{E}[\mathrm{c}_\mathrm{t}]=0`$ and $`\mathrm{E}[\mathrm{a}_\mathrm{t}]=\mathrm{E}[\mathrm{d}_\mathrm{t}]=\delta ^1`$. We are going to retrieve this result more formally in the general case.

### 2.2 General formulation

A generalization to arbitrary dimensions lead to the following stochastic random equation (SRE)

$$𝐗_𝐭=𝐀_𝐭𝐗_{𝐭\mathrm{𝟏}}+𝐁_𝐭$$
(10)
where $`(𝐗_𝐭,𝐁_𝐭)`$ are d-dimensional vectors. Each component of $`𝐗_𝐭`$ can be thought of as the price of an asset above its fundamental price. The matrices $`(𝐀_𝐭)`$ are identically independent distributed $`d\times d`$-dimensional stochastic matrices. We assume that $`𝐁_𝐭`$ are identically independent distributed random vectors and that $`(𝐗_𝐭)`$ is a causal stationnary solution of (10). Generalizations introducing additional arbitrary linear terms at larger time lags such as $`X_{t2},\mathrm{}`$ can be treated with slight modifications of our approach and yield the same conclusions. We shall thus confine our demonstration on the SRE of order $`1`$, keeping in mind that our results apply analogously to arbitrary orders of regressions.

To formalize the SRE in a rigorous manner, we introduce in a standard way the probability space $`(\mathrm{\Omega },,)`$ and a filtration $`(_t)`$. Here $``$ represents the product measure $`=_X_A_B`$, where $`_X`$, $`_A`$ and $`_B`$, are the probability measures associated with $`\{𝐗_𝐭\}`$, $`\{𝐀_𝐭\}`$ and $`\{𝐁_𝐭\}`$. We further assume as is customory that the stochastic process $`(𝐗_𝐭)`$ is adapted to the filtration $`(_t)`$.

In the following, we denote by $`||`$ the Euclidean norm and by $`||||`$ the corresponding norm for any $`d\times d`$-matrix $`𝐀`$

$$𝐀=\underset{|𝐱|=1}{sup}|\mathrm{𝐀𝐱}|.$$
(11)
In the next section 3, we formalize the “no-free lunch” condition for the SRE (10) and show that its entails in particular that the spectral radius (larger eigenvalue) of $`\mathrm{E}[𝐀_\mathrm{t}]`$ must be equal to the inverse of the discount factor, hence it must be larger than $`1`$. In section 4, we synthetize the main results on the renewal theory of SRE of the type (10) and show that the condition imposing that the exponent of the power law tails be larger than $`1`$ implies that the spectral radius of $`\mathrm{E}[𝐀_\mathrm{t}]`$ must be smaller than $`1`$. By the reverse logic, the “no-free lunch” condition automatically enforces our main result that the exponent is less than $`1`$.

## 3 The no-free lunch condition

### 3.1 No-free lunch condition under the risk-neutral probability measure

The “no-free lunch” condition is equivalent to the existence of a probability measure $``$ equivalent to $``$ such that, for all self-financing portfolio $`P_t`$, $`\frac{P_t}{S_{0,t}}`$ is a $``$-martingale, where $`S_{0,t}=_{i=0}^{t1}\delta _{i}^{}{}_{}{}^{1}`$, $`\delta _i=(1+r_i)^1`$ is the discount factor for period $`i`$ and $`r_i`$ is the corresponding risk-free interest rate.

It is natural to assume that, for a given period $`i`$, the discount rates $`r_i`$ are the same for all assets. In frictionless markets, a deviation for this hypothesis would lead to arbitrage opportunities. Furthermore, since the sequence of matrices $`\{𝐀_𝐭\}`$ is i.i.d. and therefore stationnary, this implies that $`\delta _t`$ or $`r_t`$ must be constant and equal respectively to $`\delta `$ and $`r`$.

Under those conditions, we have the following proposition :

###### Proposition 1

The stochastic process

$$𝐗_𝐭=𝐀_𝐭𝐗_{𝐭\mathrm{𝟏}}+𝐁_𝐭$$
(12)
satisfies the no-arbitrage condition if and only if

$$E_{}[𝐀]=\frac{1}{\delta }𝐈_𝐝.$$
(13)
The proof is given in the Appendix A.

The condition (13) imposes some stringent constraints on admissible matrices $`𝐀_𝐭`$. Indeed, while $`𝐀_𝐭`$ are not diagonal in general, their average must be diagonal. This implies that the off-diagonal terms of the matrices $`𝐀_𝐭`$ must take negative values, sufficiently often so that their averages vanish. The off-diagonal coefficients quantify the influence of other bubbles on a given one. The condition (13) thus means that the average effect of other bubbles on any given one must vanish. It is straightforward to check that, in this linear framework, this implies an absence of correlation between the different bubble components $`\mathrm{E}[\mathrm{X}^{(\mathrm{k})}\mathrm{X}^{(\mathrm{})}]=0`$ for any $`k\mathrm{}`$.

In constrast, the diagonal elements of $`𝐀_𝐭`$ must be positive in majority in order for $`E_{}[A_{ii}]=\delta _{}^{(i)}{}_{}{}^{1}`$, for all $`i`$’s, to hold true. In fact, on economic grounds, we can exclude the cases where the diagonal elements take negative values. Indeed, a negative value of $`A_{ii}`$ at a given time $`t`$ would imply that $`X_t^{(i)}`$ abruptly change sign between $`t1`$ and $`t`$, what does not seem to be a reasonable financial process.

### 3.2 The no-free lunch condition under historic probability measure

The historical $``$ and risk-neutral $``$ probability measures are equivalent. This means that there exists a non-negative matrix $`𝐡(\theta )=\left(h_{ij}(\theta _{ij})\right)`$ such that, for each element indexed by $`i,j`$, we have

$`E_{}[A_{ij}]`$ $`=`$ $`E_{}[h_{ij}A_{ij}]`$ (14)
$`=`$ $`h_{ij}(\theta _{ij}^0)E_Q[A_{ij}]\text{for}\text{some}\theta _{ij}^0.`$ (15)
The second equation comes from the well known result :

$$f(\theta )g(\theta )𝑑\mu (\theta )=g(\theta _0)f(\theta )𝑑\mu (\theta )\text{for}\text{some}\theta _0.$$
(16)
We thus get

$`E_{}[A_{ij}]`$ $`=`$ $`0\text{if}ij`$ (17)
$`E_{}[A_{ij}]`$ $`=`$ $`{\displaystyle \frac{1}{\delta ^{(i)}}}\text{if}i=j,`$ (18)
where the $`\delta ^{(i)}`$ can be different. We can thus write

$$E_{}[𝐀]=\stackrel{~}{\delta ^1},\mathrm{where}\stackrel{~}{\delta ^1}=\text{diag}[\delta _{}^{(1)}{}_{}{}^{1},\mathrm{},\delta _{}^{(d)}{}_{}{}^{1}].$$
(19)
Appendix B gives a proof showing that $`\delta _{}^{(i)}{}_{}{}^{1}`$ is indeed the genuine discount factor for the $`i`$-th bubble component.

## 4 Renewal theory for products of random matrices

In the following, we will consider that the random $`d\times d`$ matrices $`𝐀_t`$ are invertible matrices with real entries. We will denote by $`GL_d()`$ the group of these matrices.

### 4.1 Definitions

###### Definition 1 (Feasible matrix)

A matrix $`MGL_d()`$ is $``$-feasible if there exists an $`n`$ and $`M_1,\mathrm{},M_n`$ supp$`()`$ such that $`M=M_1\mathrm{}M_n`$ and if $`M`$ has a simple real eigenvalue $`q(M)`$ which, in modulus, exceeds all other eigenvalue of $`M`$.

###### Definition 2

For any matrix $`MGL_d()`$ and $`M^{}`$ its transpose, $`MM^{}`$ is a symmetric positive definite matrix. We define $`\lambda (M)`$ the square root of the smallest eigenvalue of $`MM^{}`$.

### 4.2 Theorem

We extend the theorem 2.7 of Davis et al. \[Davis et al., 1999\], which synthetized Kesten’s theorems 3 et 4 in \[Kesten, 1973\], to the case of real valued matrices. The proof of this theorem is given in \[Le Page, 1983\].

###### Theorem 1

Let $`(𝐀_n)`$ be an i.i.d. sequence of matrices in $`GL_d()`$ satisfying the following set of conditions:

* for some $`ϵ>0`$, $`E__A\left[𝐀^ϵ\right]<1`$ ,
* For every open $`US_{d1}`$ (the unit sphere in $`^d`$) and for all $`xS_{d1}`$ there exists an $`n`$ such that

$$\mathrm{Pr}\left\{\frac{\mathrm{𝐱𝐀}_\mathrm{𝟏}\mathrm{}𝐀_𝐧}{\mathrm{𝐱𝐀}_\mathrm{𝟏}\mathrm{}𝐀_𝐧}U\right\}>0.$$
(20)
* The group $`\{\mathrm{ln}|q(M)|,M\text{is}_A\text{-feasible}\}`$ is dense in $``$ .
* for all $`𝐫^d`$, $`\mathrm{Pr}\{𝐀_\mathrm{𝟏}𝐫+𝐁_\mathrm{𝟏}=𝐫\}<1`$ .
* There exists a $`\kappa _0>0`$ such that

$$E__A\left(\left[\lambda (𝐀_\mathrm{𝟏})\right]^{\kappa _0}\right)1.$$
(21)
* With the same $`\kappa _0>0`$ as for the previous condition, there exists a real number $`u>0`$ such that

$$\{\begin{array}{c}E__A\left(\left[sup\{𝐀_\mathrm{𝟏},𝐁_\mathrm{𝟏}\}\right]^{\kappa _0+u}\right)<\mathrm{},\hfill \\ E__A\left(𝐀_\mathrm{𝟏}^u\right)<\mathrm{}.\hfill \end{array}$$
(22)

Provided that these conditions hold,

* there exists a unique solution $`\kappa _1(0,\kappa _0]`$ to the equation

$$\underset{n\mathrm{}}{lim}\frac{1}{n}\mathrm{ln}E__A\left[𝐀_1\mathrm{}𝐀_n^{\kappa _1}\right]=0,$$
(23)
* If $`(𝐗_n)`$ is the stationary solution to the SRE in (10) then $`𝐗`$ is regularly varying with index $`\kappa _1`$. In other words, the tail of the marginal distribution of each of the components of the vector $`𝐗`$ is asymptotically a power law with exponent $`\kappa _1`$.

### 4.3 Comments on the theorem

#### 4.3.1 Intuitive meaning of the hypotheses

A suitable property for an ecomonic model is the stationnarity, i.e. the solution $`𝐗_t`$ of the SRE (10) does not blow up. This condition is ensured by the hypothesis (H1). Indeed, $`E__A\left[\mathrm{ln}𝐀\right]<0`$ implies that the Lyapunov exponent of the sequence $`\{𝐀_n\}`$ of i.i.d. matrices is negative \[Davis et al., 1999\]. And it is well known, that the negativity of the Lyapunov exponent is a sufficient condition for the existence of a stationnary solution $`𝐗_t`$.

However, this condition can lead to a too fast decay of the tail of the distibution of $`\{𝐗\}`$. This phenomenon is prevented by (H5) which means intuitively that the multiplicative factors given by the elements of $`𝐀_t`$ sometimes produce an amplification of $`𝐗_𝐭`$. In the one-dimensional bubble case, this condition reduces to the simple rule that $`a_t`$ must sometimes be larger than $`1`$ so that a bubble can develop. Otherwise, the power law tail will be replaced by an exponential tail.

So, (H1) and (H5) keep the balance between two opposite objectives : to obtain a stationnary solution and to observe a fat tailed distribution for the process ($`𝐗_𝐭`$).

Another desirable property for the model is the ergodicity : we expect the price process ($`𝐗_𝐭`$) to explore the entire space $`^d`$. This is ensured by hypothesis (H2) and (H4) : hypothesis (H2) allows $`𝐗_𝐭`$ to visit the neighborhood of any point in $`^d`$, and (H4) forbids the trajectory to be trapped at some points.

Hypothesis (H3) and (H6) are more technical ones. The hypothesis (H6) simply ensures that the tails of the distributions of $`𝐀_t`$ and $`𝐁_t`$ are thinner than the tail created by the SRE (10), so that the observed tail index is really due to the dynamics of the system and not to an ill-posed problem where the tail distribution of $`𝐀_t`$ or $`𝐁_t`$ is fat enought to dominate the large deviations behavior of the process. The hypothesis (H3) expresses some kind of aperiodicity condition.

#### 4.3.2 Intuitive meaning of (23)

The equation (23) determining the tail exponent $`\kappa _1`$ reduces to (2) in the one-dimensional case, which is simple to handle. In the multi-dimensional case, the novel feature is the non-diagonal nature of the multiplication of matrices which does not allow in general for an explicit equation similar to (2).

### 4.4 Constraint on the tail index

The first conclusion of the theorem above shows that the tail index $`\kappa _1`$ of the process $`(𝐗_𝐭)`$ is driven by the behavior of the matrices ($`𝐀_𝐭`$). We will then state a proposition in which we give a majoration of the tail index.

###### Proposition 2

A necessary condition to have $`\kappa _1>1`$ is that the spectral radius of $`E__A[𝐀]`$ be smaller than $`1`$ :

$$\kappa _1>1\rho (E__A[𝐀])<1.$$
(24)
The proof is given in the Appendix C.

This proposition, put together with Proposition 1 above, will allow us to derive our main result.

## 5 Consequences for rational expectation bubbles

We have seen in section 3 from Proposition 1 that, as a result of the no-arbitrage condition, the spectral radius of the matrix $`E_{}[𝐀]`$ is greater than $`1`$. As a consequence, by application of the converse of Proposition 2, we find that the tail index $`\kappa _1`$ of the distribution of $`(𝐗)`$ is smaller than $`1`$. This result does not rely on the diagonal property of the matrices $`\mathrm{E}[𝐀_\mathrm{t}]`$ but only on the value of the spectral radius imposed by the no-arbitrage condition.

This result generalizes to arbitrary $`d`$-dimensional processes the result of \[Lux and Sornette, 1999\]. As a consequence, $`d`$-dimensional rational expectation bubbles linking several assets suffer from the same discrepancy compared to empirical data as the one-dimensional bubbles. It would therefore appear that exogenous rational bubbles are hardly reconcilable with some of the most fundamental stylized facts of financial data at a very elementary level.

A possible remedy has recently been suggested \[Sornette, 2001\] which involves an average exponential growth of the fundamental price at some return rate $`r_f>0`$. With the condition that the price fluctuations associated with bubbles must on average grow with the mean market return $`r_f`$, it can be shown that the exponent of the power law tail of the returns is no more bounded by $`1`$ as soon as $`r_f`$ is larger than the discount rate $`r`$ and can take essentially arbitrary values. It would be interesting to investigate the interplay between inter-dependence between several bubbles and this exponential growth model.

## APPENDIX A: proof of Proposition 1 on the no-arbitrage condition

Let $`P_t`$ be the value at time $`t`$ of any self-financing portfolio :

$$P_t=𝐖_{𝐭}^{}{}_{}{}^{}𝐗_𝐭,$$
(25)
where $`𝐖_{𝐭}^{}{}_{}{}^{}=(W_1,\mathrm{}.,W_d)`$ is the vector whose componants are the weight of the different assets and the prime denotes the transpose. The no-free lunch condition reads :

$$P_t=\delta E_{}[P_{t+1}|_t]\{P_t\}_{t0}.$$
(26)
Therefore, for all self-financing strategies $`(𝐖_𝐭)`$, we have

$$𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}\left\{E_{}[𝐀]\frac{1}{\delta }𝐈_𝐝\right\}𝐗_𝐭=0𝐗_𝐭^d,$$
(27)
where we have used the fact that $`(𝐖_{𝐭+\mathrm{𝟏}})`$ is $`(_t)`$-measurable and that the sequence of matrices $`\{𝐀_𝐭\}`$ is i.i.d.

The strategy $`𝐖_{𝐭}^{}{}_{}{}^{}=(0,\mathrm{},0,1,0,\mathrm{},0)`$ ($`1`$ in $`i^{th}`$ position), for all $`t`$, is self-financing and implies

$$(a_{i1},a_{i2},\mathrm{},a_{ii}\frac{1}{\delta },\mathrm{},a_{id})(X_t^{(1)},X_t^{(2)},\mathrm{},X_t^{(i)},\mathrm{},X_t^{(d)})^{}=0,$$
(28)
for all $`𝐗_𝐭^d`$. We have called $`a_{ij}`$ the $`(i,j)^{th}`$ coefficient of the matrix $`E_{}[𝐀]`$. As a consequence,

$$(a_{i1},a_{i2},\mathrm{},a_{ii}\frac{1}{\delta },\mathrm{},a_{id})=0i,$$
(29)
and

$$E_{}[𝐀]=\frac{1}{\delta }𝐈_𝐝.$$
(30)
The no-arbitrage contidition thus implies : $`E_{}[𝐀]=\frac{1}{\delta }𝐈_𝐝`$.

We now show that the converse is true, namely that if $`E_{}[𝐀]=\frac{1}{\delta }𝐈_𝐝`$ is true, then the no-arbitrage condition is verified. Let us thus assume that $`E_{}[𝐀]=\frac{1}{\delta }𝐈_𝐝`$ hold. Then

$`E_{}[P_{t+1}|_t]`$ $`=`$ $`E_{}[𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}𝐗_{𝐭+\mathrm{𝟏}}|_t]`$ (31)
$`=`$ $`𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}E_{}[𝐗_{𝐭+\mathrm{𝟏}}|_t]`$ (32)
$`=`$ $`𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}E_{}[𝐀_{𝐭+\mathrm{𝟏}}𝐗_𝐭+𝐁_{𝐭+\mathrm{𝟏}}|_t]`$ (33)
$`=`$ $`𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}E_{}[𝐀_{𝐭+\mathrm{𝟏}}|_t]𝐗_𝐭`$ (34)
$`=`$ $`𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}E_{}[𝐀]𝐗_𝐭`$ (35)
$`=`$ $`{\displaystyle \frac{1}{\delta }}𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}𝐗_𝐭.`$ (36)
The condition that the portfolio is self-financing is $`𝐖_{𝐭+\mathrm{𝟏}}^{}𝐗_𝐭=𝐖_𝐭^{}𝐗_𝐭`$, which means that the weights can be rebalanced a priori arbitrarily between the assets with the constraint that the total wealth at the same time remains constant. We can thus write thus

$`E_{}[P_{t+1}|_t]`$ $`=`$ $`{\displaystyle \frac{1}{\delta }}𝐖_{𝐭+\mathrm{𝟏}}^{}{}_{}{}^{}𝐗_𝐭`$ (37)
$`=`$ $`{\displaystyle \frac{1}{\delta }}P_t.`$ (38)
Therefore, the discounted process $`\{P_t\}`$ is a $``$-martingale.

## APPENDIX B: proof that $`\delta _{}^{(i)}{}_{}{}^{1}`$ is the discount factor for the $`i`$-th bubble component in the historical space

Here, we express the no-free lunch condition in the historical space (or real space). The condition we will obtain is the so-called “Rational Expectation Condition”, which is a little bit less general than the condition detailed in the previous appendix A.

Given the prices $`\{X_k^{(i)}\}_{kt}`$ of an asset, labeled by $`i`$, until the date $`t`$, the best estimation of its price at $`t+1`$ is $`E_{}[X_{t+1}^{(i)}|_t]`$. So, the RE condition leads to

$$\frac{E_{}[X_{t+1}^{(i)}|_t]X_t^{(i)}}{X_t^{(i)}}=r_t^{(i)},$$
(39)
where $`r_t^{(i)}`$ is the return of the asset $`i`$ between $`t`$ and $`t+1`$. As previously, we will assume in what follows that $`r_t^{(i)}=r^{(i)}`$ is time independent. Thus, the rational expectation condition for the assets $`i`$ reads

$`X_t^{(i)}`$ $`=`$ $`\delta ^{(i)}E__X\left[X_{t+1}^{(i)}|_t\right],`$ (40)
$`=`$ $`\delta ^{(i)}E_{}\left[X_{t+1}^{(i)}|_t\right],`$ (41)
where $`\delta ^{(i)}`$ is the discount factor.

A priori, each asset has a different return. Thus, introducing the vector <sub>t</sub> whose $`i^{th}`$ componant is $`\frac{X_t^{(i)}}{\delta ^{(i)}}`$, we can summarize the rational expectation condition as

$$\stackrel{~}{𝐗}_𝐭=E_{}\left[𝐗_{𝐭+\mathrm{𝟏}}|_t\right].$$
(42)
Again, we evaluate the conditional expectation of (10), and using the fact that $`\{𝐀_t\}`$ are i.i.d., we have

$$E_{}\left[𝐗_𝐭|_{t1}\right]=E_{}[𝐀]𝐗_{𝐭\mathrm{𝟏}}.$$
(43)
This equation together with (42), leads to

$$\stackrel{~}{𝐗}_{𝐭\mathrm{𝟏}}=E_{}[𝐀]𝐗_{𝐭\mathrm{𝟏}},$$
(44)
which can be rewritten

$$\left(E_{}[𝐀]\stackrel{~}{\delta ^\mathrm{𝟏}}\right)𝐗_{𝐭\mathrm{𝟏}}=0,$$
(45)
where $`\stackrel{~}{\delta ^\mathrm{𝟏}}=\text{diag}[\delta _{}^{(1)}{}_{}{}^{1}\mathrm{}\delta _{}^{(d)}{}_{}{}^{1}]`$ is the matrix whose $`i^{th}`$ diagonal component is $`\delta _{}^{(i)}{}_{}{}^{1}`$ and $`0`$ elsewhere.

The equation (45) must be true for every $`𝐗_{𝐭\mathrm{𝟏}}^d`$, thus

$$E_{}[𝐀]=\stackrel{~}{\delta ^\mathrm{𝟏}},$$
(46)
which is the result announced in section (3.2).

## APPENDIX C: proof of Proposition 2 on the condition $`\kappa _1<1`$

First step : Behavior of the function

$$f(\kappa )=\underset{n\mathrm{}}{lim}\frac{1}{n}\mathrm{ln}E__A\left[𝐀_n\mathrm{}𝐀_1^{\kappa _1}\right]$$
(47)
in the interval $`[0,\kappa _0]`$.

In \[Kesten, 1973\], Kesten shows that the function $`f`$ has the following properties :

* $`f`$ is continuous on $`[0,\kappa _0]`$,
* $`f(0)=0`$ and $`f(\kappa _0)>0`$,
* $`f^{}(0)<0`$ (this results from the stationarity condition),
* $`f`$ is convex on $`[0,\kappa _0]`$.

Thus, there is a unique solution $`\kappa _1`$ in $`(0,\kappa _0)`$ such that $`f(\kappa _1)=0`$. In order to have $`\kappa _1>1`$, it is necessary that $`f(1)<0`$, or using the definition of $`f`$:

$$\underset{n\mathrm{}}{lim}\frac{1}{n}\mathrm{ln}E__A𝐀_n\mathrm{}𝐀_1<0.$$
(48)
The qualitative shape of the function $`f(\kappa )`$ is shown in figure 1.

Second step :

The operator $`||||`$ is convex:

$$\alpha [0,1]\text{and}(𝐀,𝐂)d\times d\text{-matrices,}\alpha 𝐀+(1\alpha )𝐂\alpha 𝐀+(1\alpha )𝐂.$$
(49)
Thanks to Jensen’s inequality, we have

$$E__A𝐀_n\mathrm{}𝐀_1E__A[𝐀_n\mathrm{}𝐀_1].$$
(50)
The matrices $`(𝐀_n)`$ being i.i.d., we obtain

$$E__A𝐀_n\mathrm{}𝐀_1\left\{E__A[𝐀]\right\}^n.$$
(51)
Now, let consider the normalized-eigenvector $`x_{\mathrm{max}}`$ associated with the largest eigenvalue

$$\lambda _{\mathrm{max}}\rho (E__A[𝐀]),$$
(52)
where $`\rho (E__A[𝐀])`$ is the spectral radius of $`𝐀`$. By definition,

$$\left\{E__A[𝐀]\right\}^n|\left\{E__A[𝐀]\right\}^nx_{\mathrm{max}}|=\lambda _{\mathrm{max}}^n.$$
(53)
Then

$$\underset{n\mathrm{}}{lim}\frac{1}{n}\mathrm{ln}E__A𝐀_n\mathrm{}𝐀_1\underset{n\mathrm{}}{lim}\frac{1}{n}\mathrm{ln}\rho (E__A[𝐀])^n=\mathrm{ln}\rho (E__A[𝐀]).$$
(54)
Now, suppose that $`\rho (E__A[𝐀])1`$. We obtain

$$f(1)=\underset{n\mathrm{}}{lim}\frac{1}{n}\mathrm{ln}E__A𝐀_n\mathrm{}𝐀_10,$$
(55)
which is in contradiction with the necessary condition (48).

Thus,

$$f(1)<0\rho (E__A[𝐀])<1.$$
(56)