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In this work, the authors consider an amplify-and-forward (AF)-based three-phase two-way system with interference at the relay. An optimum scheme to minimise the outage probability is formulated, and a closed form expression for the ‘channel-dependent’ combining coefficient ‘α’ at the relay is derived. A novel approach is presented to derive an expression for the overall outage probability of the proposed three-phase outage-optimal two-way relaying (3P-OTWR) system. The authors also perform finite signal-to-noise (SNR) diversity-multiplexing tradeoff and throughput analysis of the system. Furthermore, the problem of outage-optimum power allocation is investigated. Using the asymptotic expression for the outage probability, it is shown that there is loss of diversity owing to interference at the relay. The authors perform Monte Carlo simulations to demonstrate that the 3P-OTWR system outperforms a conventional three-phase two-way scheme. With outage-optimum power allocation, the proposed scheme achieves a gain of approximately 3 dB in the medium-to-high SNR regime over a conventional scheme with α = 0.5 and equal power at terminals. The proposed three-phase scheme in presence of co-channel interference can provide a better throughput for higher transmission rates as compared with a two-phase scheme when operated in the high SNR regime. Numerical results demonstrate accuracy of the derived expressions.
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