We study the problem of constructing sparse and fast mean revert- ing portfolios. The problem is motivated by convergence trading and formu- lated as a generalized eigenvalue problem with a cardinality constraint [6]. We use a proxy of mean reversion coefficient, the direct Ornstein-Uhlenbeck (OU) estimator, which can be applied to both stationary and nonstationary data. In addition, we introduce three different methods to enforce the sparsity of the solutions. One method uses the ratio of l1 and l2 norms and the other two use l1 norm. We analyze various formulations of the resulting non-convex opti- mization problems and develop efficient algorithms to solve them for portfolio sizes as large as hundreds. By adopting a simple convergence trading strat- egy, we test the performance of our sparse mean reverting portfolios on both synthetic and historical real market data. In particular, the l1 regularization method, in combination with quadratic program formulation as well as differ-ence of convex functions and least angle regression treatment, gives fast and robust performance on large out-of-sample data set. To appear in Journal of Scientific Computing (JOMP).

In this paper, we develop high-order bound-preserving (BP) discontinuous Galerkin (DG) methods for the coupled system of compressible miscible displacements on triangular meshes. We consider the problem with multi-component fluid mixture and the (volumetric) concentration of the $j$th component, $c_j$, should be between 0 and 1. There are three main difficulties. Firstly, $c_j$ does not satisfy a maximum-principle. Therefore, the numerical techniques introduced in (X. Zhang and C.-W. Shu, Journal of Computational Physics, 229 (2010), 3091-3120) cannot be applied directly. The main idea is to apply the positivity-preserving techniques to all $c_j's$ and enforce $\sum_jc_j=1$ simultaneously to obtain physically relevant approximations. By doing so, we have to treat the time derivative of the pressure $dp/dt$ as a source in the concentration equation and choose suitable fluxes in the pressure and concentration equations. Secondly, it is not easy to construct first-order numerical fluxes for interior penalty DG methods on triangular meshes. One of the key points in the high-order BP technique applied in this paper is the combination of high-order and lower-order numerical fluxes. We will construct second-order BP schemes and use the second-order numerical fluxes as the lower-order one. Finally, the classical slope limiter cannot be applied to $c_j$. To construct the BP technique, we will not approximate $c_j$ directly. Therefore, a new limiter will be introduced. Numerical experiments will be given to demonstrate the high-order accuracy and good performance of the numerical technique.

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We answer Hubbard's question on determining the Thurston equivalence class of “twisted rabbits”, i.e. composita of the “rabbit” polynomial with$n$th powers of the Dehn twists about its ears. The answer is expressed in terms of the 4-adic expansion of$n$. We also answer the equivalent question for the other two families of degree-2 topological polynomials with three post-critical points. In the process, we rephrase the questions in group-theoretical language, in terms of wreath recursions.