The presence of phase diffusion can lead to the loss of the advantages of quantum measurements. Squeezing is considered to be an effective method to reduce the detrimental effect of phase diffusion on the measurement. The Mach-Zehnder (MZ) interferometer has been exploited as a generic tool for precise phase measurement. Describing the reduction in quantum advantage caused by phase diffusion in an MZ interferometer that can be mitigated by squeezing is not easy to handle analytically, because the input state will change from a pure state to a mixed state after experiencing the diffusion noise in the MZ interferometer. We introduce a truncated MZ interferometer that can achieve the same potential phase sensitivity as the conventional MZ interferometer. This scheme can theoretically explain how phase diffusion reduces phase estimation and why squeezing counteracts in the presence of phase diffusion. Using the Gaussian property of the input state and the characteristic of Gaussian operation in the squeezing, the two orthogonal field quantities of the quantum state are squeezed and anti-squeezed to different degrees, and the analytic results are obtained. The truncated MZ interferometer is simpler to build and operate than the conventional MZ interferometer, and also mitigates the phase diffusion noise by the squeezing operation, thus making it useful for applications in precision metrology.
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