MS QCF - Projects

Trung Lap Nguyen

John von Neumann Institute
lap.nguyen@jvn.edu.vn
September 22, 2011
1 Random walks
The questions T are theoretical, the questions S are simulation. We call that
an event is almost sure if its probability equals one.
1.1 Some examples of random walks in one dimension
Let j. (0. 1) and (
i
)
i1
be a sequence of i.i.d random variables such that
for all i,
1(
i
= 1) = j and 1(
i
= 1) = .
For : _ 0. Let us put A
a
=

a
i=1

i
.
1. (T) What is the law of

i
+1
2
? and law of A
a
? In deduce, by Borel-
Cantelli lemma, that if j ,= , then with probability 1, the sequence
(A
a
)
a0
crosses only with nite number of times by zero. What is
about the number of passages if j = ?
2. (T) In case j ,= , give a deterministic sequence (i.e. non random)
(n
a
)
a0
such that with probability one,
A
a
~ n
a
as : +.
1
In deduce another proof of previous result as for number of passages
by zero.
3. (S) Simulate and visualize several realizations of the sequence (A
a
)
a0
.
Illustrate the result of previous question in case j ,= . In case j = ,
visualization of the sequence (A
a
)
a0
to suggest an equivalent?
4. (T) For : 1, nd an interval [c
a
. /
a
] such that
1(A
a
[c
a
. /
a
]) - 0.95.
5. (S) Illustrate the previous result by showing, for some large number :,
the histogram of a sample of large number of independent realizations
of A
a
.
1.2 Recurrent and transient random walks
We consider now a sequence (
i
)
i1
of i.i.d random variables valued in Z
o
.
For : _ 0, we denote again A
a
=

a
i=1

i
. The sequence (A
a
)
a0
is called
random walk. It follows, for r Z
o
, that the following random variable
valued in N ' + that corresponds to passed time in r after the initial
instance
1
a
:= Cc:d: _ 1; A
a
= r.
The Markov chain theory permits to demonstrate the following alternative
Theorem 1 Since law of
i
charge not only all elements of the canonical
base but also their oppositions, we have following alternative, depending on
law of
i
:
or almost surely, for all r Z
o
, the passed time 1
a
at r is nite (we
call that the walk is recurrent),
or almost surely, for all r Z
o
, 1
a
is nite (we call that the walk is
transient).
2
In the second case, for all r Z
o
, 1
a
is null with strictly positive proba-
bility.
1. (T) Given / 1. .... d, we denote for all i _ 1,
i,I
the /
tI
component
(valued on Z) of the random vector
i
(which is valued in Z
o
). What we
can say about (
i,I
)
i1
? Using question T2 of the subsection 1, prove
that if
1,I
is integrable and 1(
1,I
) ,= 0, therefore the walk is transient.
2. (S) Illustrate the result of previous question by visualizing of trajec-
tories of random walks on Z, in Z
2
and in Z
3
. We do not represent
only simple random walks (see section 4 for the denition of a simple
random walk). For 2, we can put the time : in abscissa and the value
of A
a
in ordinate. For other dimensions, the representation of time
does not necessary.
1.3 A criterion of simple recurrence
In this section, we will demonstrate a part of the previous alternative theo-
rem, for more detail
1(1
0
_ 1) = 1 ==1(1
0
) = +. (1)
1. (T) Does the equivalent 1(1 _ 1) = 1 == 1(1) = + hold for
all random variable 1 valued in N? And the implications == and
==? Give some counter-example. In the case of 1
0
, give an intuitive
explication of the implication 1(1
0
_ 1) = 1 ==1(1
0
) = +.
2. (T) Put c
0
= 1 and, for : _ 1,
c
a
= 1(A
a
= 0) and /
a
= 1(A
a
= 0 and A
i
,= 0 \1 _ i _ :).
Explain 1(1
0
) from c
a
and 1(1
0
_ 1) from /
a
.
3. (T) For all 0 _ : _ :, show that the law of

n
i=a

i
depends only on
::, and that c
a
=

a
I=1
/
I
c
aI
.
3
4. (T) Give a lower bounded of convergence radius of integer series
(.) :=
+o

a=0
c
a
.
a
and 1(.) :=
+o

a=1
/
a
.
a
and link them to 1(1
0
) and 1(1
0
_ 1).
5. (T) Give, for . [0. 1), a relationship between (.) and 1(.).
6. (T) In deduce the equivalence (1).
1.4 Application to simple walks in dimensions 1, 2 and
3
We saw in the previous that the random walk cross almost surely by 0 after
leaving initial instant (it means that it is recurrent, i.e. cross with innite of
times by all points of Z
o
with probability 1), if and only if 1(1
0
) = +, it
is equivalent, after the questions T6 and T10, indeed

a1
1(A
a
= 0) = +.
We consider from now the case of a random walk on Z
o
, called simple, which
jumps over its closest neighborhoods with equal probability:
i
follows the law
of uniform on the set of canonical bases and their opponents. For example,
if d = 1, we have
1(
1
= 1) = 1(
1
= 1) =
1
2
,
if d = 2,
1(
1
= (1. 0)) = 1(
1
= (1. 0)) = 1(
1
= (0. 1)) = 1(
1
= (0. 1)) =
1
4
.
1.4.1 Random walks on Z (we suppose that d = 1)
1. (T) Show, using the question T1, that the chain is recurrent.
4
2. (S) We dene the return time at zero t := inf : _ 1; A
a
= 0. Give
an estimated value of the law of t (i.e. the values of 1(t = /) for /
reasonable).
1.4.2 Random walks on Z
2
1. (T) The vectors
1
:= (1. 1) and
2
:= (1. 1) form a base of R
2
. Let

+
1
and
+
2
be linear-coordinates forms, i.e. the operators which, for all
vector of R
2
associate their coordinates on the base (1. 1). (1. 1).
Give, for (r. ) R
2
, the formula of
+
1
(r. ) and of
+
2
(r. ). In deduce
that
_
2
+
1
(A
a
) and
_
2
+
2
(A
a
) are independent simple random walks
on Z.
2. (T) In deduce the value, for : _ 1, of 1(A
a
= 0).
3. (T) In deduce that the chain is recurrent. What do you think about
the idiom "All roads lead to Rome"?
4. (S) Visualize a simple random walk in Z
2
.
5. (S) We dene the return time at zero t := inf : _ 1; A
a
= 0. Give an
estimation for the law of t (i.e. the vectors of 1(t = /) for reasonable
/).
1.4.3 Random walks in Z
3
(optimal)
1. (T) Show that the chain is transient. Does the previous idiom hold in
the space?
2. (S) Visualize a simple random walk in Z
3
. Give, for all reasonable /,
an estimation of 1(t = /), with t := inf : _ 1; A
a
= 0.
5
2 Simple Model of Financial Market
Summary 2 We study the nancial market with discrete times for a risky
asset and a non-risky asset, called Cox-Ross-Rubinstein model. We show
there exists unique adapted law of probability to model and we expect the
price of certain options.
(T
0
) Preliminary question: Show that if A and 1 are random variables
dened on the same nite-probability space such that A is independent of 1 ,
therefore the random variable 1(1 [A) (which represents conditional expec-
tation of 1 knowing A) is constant and equals 1(1 ). What can we deduce
if A is constant?
2.1 Model description and probability measure
2.1.1 Model description
We consider a stock market in discrete time t 0. .... 1 where 1 is strictly
positive integer, in which there are two investment possibilities: a risk-free
placement and a risky placement.
Investment in risk-free asset, with a wealth ` invested at t will return
`(1 + :) at time t + 1, where : 0 a positive constant, so-called risk-free
rate.
Investment in risky asset, which represents for example a share or foreign
exchanges, denoted by o
t
the price at t. Between t and t+1 of two possibilities
whether o
t+1
= (1 + d)o
t
or o
t+1
= (1 + n)o
t
with 1 < d < 0 < n
independent on t.
T1. We suppose throughout the project that the risky asset is more
protable than the other one. Give an inequality between : and n.
The time is indexed by 0. 1. .... 1 where 1 is a xed positive integer.
Evolution of the risky asset (or the market) is indexed by := d. n
T
for
6
all . = (.
1
. .
2
. .... .
T
) , the evolution of o associated with . is
o
t
= o
0
t

i=1
(1 +.
i
), t 0. 1. .... 1 ,
where o
0
is xed positive real.
2.1.2 Probability measure
Our model will be completely dened when we are provided for the measur-
able set (. T()) a probability measure. This probability measure has to
satisfy the following constraints:
1. For all
. , 1(.) 0. (2)
2. Put A
t
: . (.
1
. .
2
. .... .
t
) n. d
t
(if t = 0, by convention
A
0
= 0). The prices of quoted assets in stock markets, without divi-
dend, are dened in function of later expected selling price. Therefore,
under P
\0 _ t _ t
t
_ 1, 1(o
t
0 [A
t
) = o
t
. (3)
Nevertheless, carrying out ` dollars at t is equivalent to `(1 + :)
t
0
t
at t
t
. This remark implies the time dimension in the value of money of
condition (3). Therefore
\0 _ t _ t
t
_ 1, 1(o
t
0 [A
t
) = (1 +:)
t
0
t
o
t
. (4)
We nd then a probability measure 1 satisfying (2) and (4).
T2. Show that (4) is equivalent to
\0 _ t _ t
t
_ 1, 1((1 + :)
(t+1)
o
t+1
[A
t
) = (1 +:)
(t+1)
o
t
. (5)
Remark 3 We say that ((1 + :)
(t+1)
o
t
)
0tT
is a martingale with respect
to the ltration (o(A
t
))
0tT
.
7
T3. For some t [0. 1),
1
.
2
. ....
t
. d. n,
j
.
1
,...,.t
() = P(.
t+1
= [.
1
=
1
. .... .
t
=
t
).
Show that (5) is equivalent to the fact that, \t [0. 1) and
1
.
2
. ....
t
.
d. n,
(1 +d)j
.
1
,.
2
,...,.t
(d) + (1 + n)j
.
1
,.
2
,...,.t
(n) = 1 +:.
T4. Using the fact that we also have j
.
1
,.
2
,...,.t
(d) +1j
.
1
,.
2
,...,.t
(n) = 1 and
the following equation
P(.
1
=
1
. .... .
T
=
T
) =
T1

t=0
j
.
1
,.
2
,...,.t
(
t+1
),
show that there exists unique probability measure P satisfying (2) and (4),
and that under this probability measure, (.
1
. .
2
. .... .
T
) are i.i.d of law
P(.
1
= d) =
n :
n d
and P(.
1
= n) =
: d
n d
.
S1. Put o
0
= 100, 1 = 30, : = 0.1%, n = 0.2%, d = 0.15%, simulate
random evolution of o and visualize some trajectories. Using the Large
Number law, give the expected value 1(o
T
). Estimate then the variance of
o
T
and deduce, by using the Center Limit Theorem, an interval of condence
for the estimator of 1(o
T
). Compare to the theoretical value of 1(o
T
).
2.2 Portfolio
Let us denote by c
t
the quantity of risky asset between t 1 and t, and by
,
t
the quantity of non-risky asset in the same period. The pair (c
t
. ,
t
)
t[0,T]
is called portfolio. The initial value of this portfolio is
\
0+
:= ,
1
(1 +:)
0
+ c
1
o
0
and its value at the end of the rst period is
\
1
:= ,
1
(1 +:)
1
+ c
1
o
1
.
8
The value function \
t
and \
t+
is dened as the same argument for all
t 1. .... 1.
The portfolio is said to be self-nancing if, for all t 1. .... 1 1,
\
t
= \
t+
. This quantity is also denoted by \
t
, the portfolio value at t.
T5. Show that, the actual value, so-called

\
t
of the portfolio at time t,
for all t 0. .... 1, by

\
t
:= (1 + :)
t
\
t
,
satisfying the following property:
\0 _ t _ 1, 1(

\
t
0 [A
t
) =

\
t
.
2.3 Price expectation of derivative asset and hedging
portfolios
A derivative asset for maturity 1 is a random variable H which depends on
o
0
. .... o
T
. A classical example is H = max o
T
1. 0, with 1 1
+
xed,
which represents the gain obtained by exercise, at date 1, a call option of
strike 1. We call hedging portfolio of H, a portfolio (c
t
. ,
t
)
t1,...,T
such that
the nal value \
T
of the portfolio equals H.
T6. Show that for all t 0. .... 1 the value of such portfolio is equal to
1((1 + :)
tT
H [ A
t
).
T7. Put G = 1((1 + :)
1
H [ A
T1
), show that there exist two random
variables c. / in function of A
T1
such that
G = /(1 +:)
T1
+ co
T1
and H = /(1 +:)
T
+ co
T
.
T8. Show, by recurrence on 1 _ 1, that in our model, there exists a
hedging portfolio for all asset H.
T9. We dene the price at date 0 of asset H as the value, at date 0, of
a hedging portfolio with nal value H. Show that this price is well-dened
(i.e. it does not depend on the portfolio) and its value is (1 +:)
T
1(H).
S2. We keep the parameters in S1 and put H = max o
T
1. 0 with
1 = 102. Using the law of Large Numbers, estimate \
0
. Estimate then the
9
variance of H and deduce from that , by using the Center Limit Theorem,
an interval of condence for the estimator of \
0
.
3 High Frequency Statistical Arbitrage
We study in this project a statistical arbitrage model. We suppose to be
able to deal with a nancial asset (buy and sell) in high frequency (several
operators in one minute). As a result of high frequency, the model of asset
price is no longer ecient, and there exists in principle some very simple
arbitrage opportunities (i.e. speculative strategies which gain in average).
These strategies collide the "market ction". We shall study in more detail
of this conict in a very rudimentary model.
3.1 Price model in small scales
Let us denote by (o
a
)
a0
the treated price of nancial asset. The instants
: = 0. 1. ... are discrete successive transactions. For : _ 1, we denote o
a
=
o
a
o
a1
. We suppose more that o
a
is integrable for all :. It has to remark,
in practice, that with very short time scales, an increase is more probable
after a decrease., i.e.,
P(o
a+1
0 [ o
a
< 0) P(o
a+1
0 [ o
a
0), : _ 1. (6)
We say that (o
a
)
a0
satises a property of potential arbitrage if (6) holds
and 1(o
a
) = 0 for all : _ 1.
Let (
a
)
a1
and (
a
)
a0
be two i.i.d random variable sequences in which
the law is given as
P(
1
= 1) = P(
0
= 1) = 1 P(
1
= 1) = 1 P(
0
= 1) =
1
2
.
Put o
0
= 0 and for : _ 1,
o
a
= o
a1
+ o
a
+
o
_
2
(
a

a1
), (7)
where o 0 and o _ 0 are two model parameters.
10
1. (T) Show that (o
a
)
a0
satises a property of potential arbitrage for
some value of o 0 and o _ 0 that we can clarify.
2. (T) Calculate 1(o
a+I
o
a
) for / _ 0. Give a link between this result
and the property (6).
3.2 Arbitrage strategies
We construct the following strategy:
On the event o
a
< 0, we buy immediately at time : a quantity c
of asset and sell it out at time : + 1.
On the event o
a
0, we sell immediately at time : a quantity c
of asset and buy it back at time : + 1.
Therefore, the price o
a
indicates only the price of transaction. When we
buy (resp. sell) at time :, we are not ensured to have the transaction with
price o
a
: it is possible that the best price to buy, is bigger than o
a
(resp.
the best price to sell is smaller than o
a
). Hence, the eective price of the
transaction will be
o
(b)
a
= o
a
+
(b)
a
for a buy, o
(c)
a
= o
a

(c)
a
for a sell,
where (
(b)
a
)
a1
and (
(c)
a
)
a1
are sequences of i.i.d positive variable with ex-
pected value : 0. We call the spread at instant : the variable
(b)
a
+
(c)
a
.
1. (T) Show that expected value of the gain q for a pair buy-sell or sell-buy
is given as
q = 1[[o
2
[:iq:(o
2
o
1
)] 2:.
2. (T) What are conditions on o, o and : under which the strategy is
protable?
11
3. (T) We suppose o = 1 and o ,=
_
2
2
. We suppose more that the random
variable `. which is the number of changes in price in one day, follows
unknown law with mean ` 0 and that ` is independent of (o
a
)
a0
and of spread. Discuss in function of : and ` existence of minimal
value for o such that the average gain of the strategy during one day
is greater or equal to 1.
4. (S) We suppose that
(b)
1
and
()
1
follow the law of Poisson with para-
meter 1. Simulate the process (o
a
)
a0
and the gain process
q
a
= [o
a+1
[:iq:(o
a+1
o
a
) 2
a
,
where
2
a
= (
(b)
a
+
(c)
a+1
)1
Sn<0
+ (
(b)
a+1
+
(c)
a
)1
Sn0
and represent them in graphs.
5. (S) Verify by carrying out several random draws that we can nd the
theoretical expected value.
3.3 Disappearance of arbitrage opportunity in large
scales
(We work under the hypothesis of previous section)
1. (S) Represent simultaneously on two graph a simulation of price for a
trajectory (o
a
)
a=0,...,100
with o = 1 and o = 0 or 3.
2. Do again the same experience with (o
a
)
a=0,...,10
4. Interpret visually.
3. (S) Let / _ 1 be an integer. We consider the price of asset under /
scales as
o
(I)
a
= o
aI
.
From now, we work in this temporal scale. Verify by simulations that
the strategy is no longer ecient as / is increased. Suggest an explica-
tion.
12
3.4 Estimation of volatility levels
In practice, the levels o, o and : are unknown. We suppose that we have
historical data, and that we obtained (o
a
.
(&n)
a
) for : = 1. .... `, where n
a
are i.i.d, and valued in /. : with uniform probability.
1. (T - optional) Propose an estimator :
.
of : and demonstrate the
convergence by law
_
`( :
.
:) A(0. c
2
),
where c
2
is a parameter which is claried in function of the distribution
of spread and A(0. c
2
) is denoted for the law of center normal with
variance c
2
.
2. (T and S) Propose estimators of o
2
, o
2
. We can consider (by assuming
that ` divided by /) the following quantities:
\ 1
.
=
1
`
.

a=0
(o
a
)
2
and \ 1
(2)
.
=
/
`
.I

a=0
_
o
(I)
a
_
2
and verify their eciency under simulations.
3. (T and/or S - optional) How ` behaves in function of :, o and o such
that we can ensure an opportunity of an average gain during one day
from 1 to 95%?
4 Lets go to Vegas!
The purpose of this project is to answer the question, in which the casinos
in Las Vegas are immensely interested, to know how many times we have to
shu-e a deck of cards to make it the most mixed up. Do we have to shu-e
it 3 times, 10 times or 1000 times a deck of 52 cards???
If the cards are well mixed, the chance of cheating and predicting the game
will be remarkably lowered.
This simple question leads to many problems:
13
What is called "a well mixed deck"? And how we measure the distance
between a deck well or badly mixed up?
Describe the process of shu-ing cards?
Gather all of those to give a quantitative answer.
We will rstly study a model a little dierent, yet still related, called
Tsetlins library.
Within the framework of this problem, we will see a particular phenomenon
called cuto, which also features in other models (Ehrenfest urn, Markov
chain models...)
4.1 Mathematical framework
4.1.1 Deck of cards and deck well mixed up
We consider a deck of : cards numbered from 1 to :. The state of a deck of
cards is a conguration : describing current order of : cartes. We, therefore,
are watching permutations of : rst integers. Number of possible permu-
tations is :!. So the state of the deck is in a space containing :! dierent
congurations (meaning that, with a deck of 52 cards, 10
68
) . The space
describing the set of possible congurations is denoted by 1
a
.
We, therefore, have a natural denition of a deck well mixed up: a deck well
mixed up is a deck which gives the same probability to all the possible con-
gurations: \: 1. 1(1) = 1,:!. What we have to do now is to understand
how to measure the distance between ideal deck and current deck.
4.1.2 Distance towards ideal
As previously said, the ideal shu-e corresponds the idea that each possible
conguration must have the same probability. As our process can never
achieve this ideal in one shu-e (nor even in one million ones), we have to
evaluate the distance to this idea. So we introduce the distance in total
14
variation: Q
1
and Q
2
are two probability measures in the space of possible
congurations, we denote:
|Q
1
Q
2
| = max
1n
[Q
1
() Q
2
()[
T1. Demonstrate that:
|Q
1
Q
2
| =
1
2

1n
[Q
1
(:) Q
2
(:)[
(is a notation of the distance 1
1
between probability)
4.1.3 Purpose of project
The purpose of the project is to study in function of t the distance between
our process of shu-e and uniform distribution that we denote l (\:
1
a
. l(:) = 1,:!), is: starting from :
0
- the initial conguration (that is
supposed to be 1,2,...,n),
[[1
t
(.[:
0
) l[[
where 1
t
represents the congurations law of instant t (i.e. after t shu-es).
Firstly, we will make a purely numerical study, and after that, a completely
theoretical study which will let us come back to the numerical party and be
more eective. In order to dene these objects, we will study a "simple"
model: Tsetlins library.
4.2 Tsetlins library
We consider a pile of : les that we occasionally use. The i
tI
le is used
with probability .
i
, with .
i
0 and

a
1
.
i
= 1. The need of putting the
most frequently-used les above of the pile seems natural. In order to do
that (and without knowing .
i
), the most simple method is when we take a
le, we put it on the pile.
We translate it mathematically: we number the les 1. .... : and denote o
15
permutation giving rearrangement of these index: o(i) is index of the position
i. Moving the le index i returns to change o of a cycle (1. 2. .... o
1
(i)). The
probability of moving the permutation o to j in a stage is:
1(o. j) =
_
.
i
if j = (i. o(1). .... o(o
1
(i) 1). o(o
1
(i) + 1). .... o(:))
0 otherwise.
This will help to represent K(o. j) as entry (o. j) of a matrix :!by :!. After
two draw of les, probability of passing from o to j is:
1
2
(o. j) =

1(o. )1(. j).

We generate it to obtain 1
|
.
T2. : is probability in the set of permutations given by:
:(o) :=
.
o(1)
1 .
o(1)
.
o(2)
1 .
o(1)
.
o(2)
...
.
o(a)
1 .
o(1)
... .
o(a)
.
Demonstrate that this probability veries:

o
:(o)1(o. j) = :(j).
We call this probability invariant probability, as when we start for the initial
conguration randomly distributed as : and the conguration after a stage
(randomly) is still of the law :.
S3. For dierent values of : (necessarily not to large as you will put it
on your computer), expect by Monte Carlo method the distance:
[[1
t
(o
0
. .) :(.)[[
T\
while o
0
= (1. 2. .... :) and .
i
= 1,: for all i.
T4. Consider 2 cards packet: the rst one start from conguration
(1. 2. .... :) and the other randomly depending on distribution :.
16
For each time t= 1. 2. ...we choose index i with probability .
i
and this
index i to summit of 2 packages This process will make the 2 packages in
the same order on rst positions and once that an index i is on the same
position in the 2 packet, it will be on the same position in the 2 packet for
all future change. We call 1 the rst time when all index are chosen for at
least one time.
Justify that at time 1 the rst packet is distributed depending on :. We
call it generally coupling time.
T5. Demonstrate (successively) that if t is bigger than :
[[1
t
(o
0
. .) :(.)[[
T\
_ 1
Tt
_
a

i=1
(1 .
i
)
t
.
Compare this bound with your previous numerical results.
Still in the case where .
i
= 1,: for all i, demonstrate if t = :(ln(:) + c)
(for c 0) then:
[[1
t
(o
0
. .) :(.)[[
T\
_ c
c
.
What do you obtain numerically for t = :(ln(:) c)???
Remark 4 Why we are interested in this problem of Tsetlins library for our
casinos??? In case .
i
= 1,:, this one correspond to a basic shu-e of cards:
we take a card randomly and put it above. Its very basic, very slow-moving
and we feel intuitively that we must be able to nd it better.
4.3 Ri-e Shu-ing
There are many ways to describe the shu-e of cards. We use here the process
called ri-e shu-ing (or GRS as Gilbert, Reeds and Shannon introduced this
process) which represents how a person shu-e cards for practical purposes.
It composes 2 stages: we start from a conguration : then
17
1. we divide the deck into 2 packets of size / and : /, / is chosen
randomly following a Binomial law of parameter : and 1,2, probability
of having the rst packet of size / is 2
a
_
a
I
_
;
2. We interlace the two packets in the following way: if we have j
1
cards
in the packet 1 and j
2
cards in the second, we drop the card at the
bottom of one of the two packet (face on the table) with probability
j
1
j
1
+j
2
that it comes from the rst package and
j
2
j
1
+j
2
from the second
and we restart until the last one of 2 packets.
We denote 1(:
1
[:
0
) probability of obtaining conguration :
1
starting
from :
0
, and if we repeat t times this process, we denote 1
t
(:
1
[:
0
) which
corresponds to the convolution of 1). (We can remark that 1
t
corresponds
to 1 to the power of t in matrix product meaning).
We denote that this method of shu-ing preserve relative order of two
packets, which well corresponds to the usual way of shu-ing cards.
T6. Demonstrate that once the deck is divided into two, probability
of observing an particular interlacing is 1,
_
a
I
_
no matter what interlacing
considered.
4.4 Numerical study of ri-e shu-ing
S7. For : = 3. 4. 5. .... 8 (and more if you can) draw the graph in function
of t (from 1 to 15) a numerical approximation of [[1
t
(.. :
0
) l[[. We shall
approximate 1
t
(.[:
0
) by Monte-Carlo method: we realize 50 + : random
shu-es and approximate 1
t
(:[:
0
) by the frequency of : obtained.
S7bis. We can also legitimately consider in a simpler way: What happens
if I randomly split the packet into 2 or 4 parts for each deal (with probability
1,2 for each and interchange the two packet. Calculate the same quantities
as previous question. What do you observe?).
18
4.4.1 Theoretical study of ri-e shu-ing
We now give an exact formula for [[1
t
(.[:
0
) l[[, which is calculable. Since,
for large :, the general formula is absolutely inapplicable. We always assume
to start a game in natural ranking 1. 2. .... :.
Relevant sequence We call a subsequence in a permutation relevant se-
quence if it is consecutively maximal increasing: we take a card r and search
for card r + 1 after r, if we nd it, then continue for r + 2; otherwise we
come back to r and start in other direction backward to r 1.
The card game is then disjoint union of relevant sequences. For example,
with 8 cards observed 45162378, there are two relevant sequences.
In a game with : cards, which is conguration giving a relevant sequence? :
relevant sequences?
Remark 5 It turns out that identifying this type of sequences is one of tech-
niques used by magicians to identify the cards in their laps...
4.5 Bigger and stronger than the ri-e shu-e: the a-
shu-e
Given c 0 and rather than making a cut in two packages: we cut at
c packages with sizes j
1
. .... j
o
respectively (thus, j
1
+ j
2
+ ... + j
o
= :)
following multinominal law
_
o
n
a!
j1!...ja!
_
, after that we drop a card on the table
with probability relating to the size of package
j
i
j
1
+...+ja
as previous. The
ri-e shu-e is therefore the 2-shu-e.
T8. Show that the number of possible "cuts and interweaving" is c
a
.
T9. Let : be conguration with : relevant sequences, show that the
probability archiving this permutation with a c :/n,,|c is
c
a
_
: + c :
:
_
.
19
T10. Show that a c :/n,,|c followed by a / :/n,,|c is equivalent
to a c/ :/n,,|c.
4.6 Final assembly
T11. Show that
[[1
t
l[[ =
1
2
a

v=1

a,v

2
at
_
: + 2
t
:
:
_

1
:!

where
a,v
is the number of congurations with : relevant sequences.
T12(optional). Show that

a,1
= 1

a,v
= :
a

v1

)=1
_
: + : ,
:
_

a,)
.
S13. Using these formulas to draw the exact graph of [[1
t
l[[ to
compare to results of the previous section. Give a comment for these graphs.
For : = 52, what is the value of t seem reasonable for you? Identify t(:), the
approximated value of t such that the distance in total variation is smaller
than 1,3. What is the shape of t(:)?
Remark 6 It turns out that with ne calculus we can show that
[[1
t
l[[ = ,(c)
with ,(c) 0 as c if t =
3
2
log
2
(:)+c. So it is tremendous improvement
over the Tsetlins library method.
20