A dynamical generalisation of the nonlocal coherent-potential approximation is derived based upon the functional integral approach to the interacting electron problem. The free energy is proven to be variational with respect to the self-energy provided a self-consistency condition on a cluster of sites is satisfied. In the present work, calculations are performed within the static approximation and the effect of the nonlocal physics on the formation of the local moment state in a simple model is investigated. The results reveal the importance of the dynamical correlations.
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