Exponentially concave functions and a new information geometry
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Abstract: A function is exponentially concave if its exponential is concave. We consider exponentially concave functions on the unit simplex. In a previous paper we showed that gradient maps of exponentially concave functions provide solutions to a Monge-Kantorovich optimal transport problem and give a better gradient approximation than those of ordinary concave functions. The approximation error, called L-divergence, is different from the usual Bregman divergence. Using tools of information geometry and optimal transport, we show that L-divergence induces a new information geometry on the simplex consisting of a Riemannian metric and a pair of dually coupled affine connections which defines two kinds of geodesics. We show that the induced geometry is dually projectively flat but not flat. Nevertheless, we prove an analogue of the celebrated generalized Pythagorean theorem from classical information geometry. On the other hand, we consider displacement interpolation under a Lagrangian integral action that is consistent with the optimal transport problem and show that the action minimizing curves are dual geodesics. The Pythagorean theorem is also shown to have an interesting application of determining the optimal trading frequency in stochastic portfolio theory.
Let \(\Delta_n\) be the open unit simplex \(\{(p_1,\ldots p_n)\in\mathbb R^n:p_i>0,\sum_{i=1}^n p_i=1 \}\). A function \(\varphi:\Delta_n\to\mathbb R^n\cup\{\infty\}\) is called exponentially concave if \(e^\varphi\) is concave. For each exponentially concave function \(\varphi\) we can associate its \(L\)-divergence \(T(q|p)=\log(1+\nabla\varphi(p)\cdot (q-p))- (\varphi(q)-\varphi(p))\). Similarly to classical information geometry, the authors introduce and study a new geometry on \(\Delta_n\) consisiting of a Riemann metric and two connections associated with the \(L\)-divergence. Some applications to optimal transport problem and to mathematical finances are discussed.
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