Monotone concave operators: An application to the existence and uniqueness of solutions to the Bellman equation

We propose a new approach to the issue of existence and uniqueness of solutions to the Bellman equation, exploiting an emerging class of methods, called monotone map methods, pioneered in the work of Krasnosel’skii (1964) and Krasnosel’skii-Zabreiko (1984). The approach is technically simple and intuitive. It is derived from geometric ideas related to the study of fixed points for monotone concave operators defined on partially order spaces.Dynamic Programming; Bellman Equation; Unbounded Returns

Exploiting symmetries in SDP-relaxations for polynomial optimization

In this paper we study various approaches for exploiting symmetries in polynomial optimization problems within the framework of semi definite programming relaxations. Our special focus is on constrained problems especially when the symmetric group is acting on the variables. In particular, we investigate the concept of block decomposition within the framework of constrained polynomial optimization problems, show how the degree principle for the symmetric group can be computationally exploited and also propose some methods to efficiently compute in the geometric quotient.Comment: (v3) Minor revision. To appear in Math. of Operations Researc

Number of paths versus number of basis functions in American option pricing

An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex pricing problems have motivated the development of techniques that combine Monte Carlo simulation with dynamic programming. One class of methods approximates the option value at each time using a linear combination of basis functions, and combines Monte Carlo with backward induction to estimate optimal coefficients in each approximation. We analyze the convergence of such a method as both the number of basis functions and the number of simulated paths increase. We get explicit results when the basis functions are polynomials and the underlying process is either Brownian motion or geometric Brownian motion. We show that the number of paths required for worst-case convergence grows exponentially in the degree of the approximating polynomials in the case of Brownian motion and faster in the case of geometric Brownian motion.Comment: Published at http://dx.doi.org/10.1214/105051604000000846 in the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org

On optimal and near-optimal turbo decoding using generalized max operator

Motivated by a recently published robust geometric programming approximation, a generalized approach for approximating efficiently the max* operator is presented. Using this approach, the max* operator is approximated by means of a generic and yet very simple max operator, instead of using additional correction term as previous approximation methods require. Following that, several turbo decoding algorithms are obtained with optimal and near-optimal bit error rate (BER) performance depending on a single parameter, namely the number of piecewise linear (PWL) approximation terms. It turns out that the known max-log-MAP algorithm can be viewed as special case of this new generalized approach. Furthermore, the decoding complexity of the most popular previously published methods is estimated, for the first time, in a unified way by hardware synthesis results, showing the practical implementation advantages of the proposed approximations against these method