Worst-Case Value-at-Risk of Non-Linear Portfolios

Portfolio optimization problems involving Value-at-Risk (VaR) are often computationally intractable and require complete information about the return distribution of the portfolio constituents, which is rarely available in practice. These difficulties are further compounded when the portfolio contains derivatives. We develop two tractable conservative approximations for the VaR of a derivative portfolio by evaluating the worst-case VaR over all return distributions of the derivative underliers with given first- and second-order moments. The derivative returns are modelled as convex piecewise linear or - by using a delta-gamma approximation - as (possibly non-convex) quadratic functions of the returns of the derivative underliers. These models lead to new Worst-Case Polyhedral VaR (WCPVaR) and Worst-Case Quadratic VaR (WCQVaR) approximations, respectively. WCPVaR is a suitable VaR approximation for portfolios containing long positions in European options expiring at the end of the investment horizon, whereas WCQVaR is suitable for portfolios containing long and/or short positions in European and/or exotic options expiring beyond the investment horizon. We prove that WCPVaR and WCQVaR optimization can be formulated as tractable second-order cone and semidefinite programs, respectively, and reveal interesting connections to robust portfolio optimization. Numerical experiments demonstrate the benefits of incorporating non-linear relationships between the asset returns into a worst-case VaR model.Value-at-Risk, Derivatives, Robust Optimization, Second-Order Cone Programming, Semidefinite Programming

Optimality of Treating Interference as Noise: A Combinatorial Perspective

For single-antenna Gaussian interference channels, we re-formulate the problem of determining the Generalized Degrees of Freedom (GDoF) region achievable by treating interference as Gaussian noise (TIN) derived in [3] from a combinatorial perspective. We show that the TIN power control problem can be cast into an assignment problem, such that the globally optimal power allocation variables can be obtained by well-known polynomial time algorithms. Furthermore, the expression of the TIN-Achievable GDoF region (TINA region) can be substantially simplified with the aid of maximum weighted matchings. We also provide conditions under which the TINA region is a convex polytope that relax those in [3]. For these new conditions, together with a channel connectivity (i.e., interference topology) condition, we show TIN optimality for a new class of interference networks that is not included, nor includes, the class found in [3]. Building on the above insights, we consider the problem of joint link scheduling and power control in wireless networks, which has been widely studied as a basic physical layer mechanism for device-to-device (D2D) communications. Inspired by the relaxed TIN channel strength condition as well as the assignment-based power allocation, we propose a low-complexity GDoF-based distributed link scheduling and power control mechanism (ITLinQ+) that improves upon the ITLinQ scheme proposed in [4] and further improves over the heuristic approach known as FlashLinQ. It is demonstrated by simulation that ITLinQ+ provides significant average network throughput gains over both ITLinQ and FlashLinQ, and yet still maintains the same level of implementation complexity. More notably, the energy efficiency of the newly proposed ITLinQ+ is substantially larger than that of ITLinQ and FlashLinQ, which is desirable for D2D networks formed by battery-powered devices.Comment: A short version has been presented at IEEE International Symposium on Information Theory (ISIT 2015), Hong Kon

Transceiver design for single-cell and multi-cell downlink multiuser MIMO systems

This thesis designs linear transceivers for the down link multiple user multiple input multiple output single-cell and multiple-cell systems. The transceivers are designed by assuming perfect and imperfect channel state information at the BS and mobile stations (MS). Different signal to interference plus noise ratio, mean square error and rate-based design criteria are considered. These design criteria are formulated by considering total BS, per BS antenna, per user, per symbol or a combination of per BS antenna and per user (symbol) power constraints. To solve these problems generalized down link up link and down link interference duality approaches are proposed. We have also shown that the weighted sum rate maximization problem can be equivalently formulated as weighted sum mean square error minimization problem with additional optimization variables and constraints. We also develop distributed transceiver design algorithms to solve weighted sum rate and mean square error optimization problems for coordinated BS systems. The distributed transceiver design algorithms employ modify matrix fractional minimization and Lagrangian dual decomposition methods.Comment: PhD Thesi

Dynamic Resource Allocation in Cognitive Radio Networks: A Convex Optimization Perspective

This article provides an overview of the state-of-art results on communication resource allocation over space, time, and frequency for emerging cognitive radio (CR) wireless networks. Focusing on the interference-power/interference-temperature (IT) constraint approach for CRs to protect primary radio transmissions, many new and challenging problems regarding the design of CR systems are formulated, and some of the corresponding solutions are shown to be obtainable by restructuring some classic results known for traditional (non-CR) wireless networks. It is demonstrated that convex optimization plays an essential role in solving these problems, in a both rigorous and efficient way. Promising research directions on interference management for CR and other related multiuser communication systems are discussed.Comment: to appear in IEEE Signal Processing Magazine, special issue on convex optimization for signal processin

Guaranteed Minimum-Rank Solutions of Linear Matrix Equations via Nuclear Norm Minimization

The affine rank minimization problem consists of finding a matrix of minimum rank that satisfies a given system of linear equality constraints. Such problems have appeared in the literature of a diverse set of fields including system identification and control, Euclidean embedding, and collaborative filtering. Although specific instances can often be solved with specialized algorithms, the general affine rank minimization problem is NP-hard. In this paper, we show that if a certain restricted isometry property holds for the linear transformation defining the constraints, the minimum rank solution can be recovered by solving a convex optimization problem, namely the minimization of the nuclear norm over the given affine space. We present several random ensembles of equations where the restricted isometry property holds with overwhelming probability. The techniques used in our analysis have strong parallels in the compressed sensing framework. We discuss how affine rank minimization generalizes this pre-existing concept and outline a dictionary relating concepts from cardinality minimization to those of rank minimization

MAP inference via Block-Coordinate Frank-Wolfe Algorithm

We present a new proximal bundle method for Maximum-A-Posteriori (MAP) inference in structured energy minimization problems. The method optimizes a Lagrangean relaxation of the original energy minimization problem using a multi plane block-coordinate Frank-Wolfe method that takes advantage of the specific structure of the Lagrangean decomposition. We show empirically that our method outperforms state-of-the-art Lagrangean decomposition based algorithms on some challenging Markov Random Field, multi-label discrete tomography and graph matching problems