In this paper we study the excursion time of a Brownian motion with drift outside a corridor by using a four-state semi-Markov model. In mathematical finance, these results have an important application in the valuation of double-barrier Parisian options. We subsequently obtain an explicit expression for the Laplace transform of its price.

In this paper we present simple extensions of earlier works on the optimal time to exchange one basket of log Brownian assets for another. A superset and subset of the optimal stopping region in the case where both baskets consist of multiple assets are obtained. It is also shown that a conjecture of Hu and Øksendal (1998) is false except in the trivial case where all the assets in a basket are the same processes.

A nanocomponent is a collection of atoms arranged to a specific design in order to achieve a desired function with an acceptable performance and reliability. The type of atoms, the manner in which they are arranged within the nanocomponent, and their interrelationship have a direct effect on the nanocomponent's reliability (survival) function. In this paper we propose models based on the notion of a copula that are used to describe the relationship between the atoms of a nanocomponent. Having defined these models, we go on to construct a ‘nanocomponent’ model in order to obtain the reliability function of a nanocomponent.

To enhance the performance of a system, a common practice employed by reliability engineers is to use redundant components in the system. In this paper we compare lifetimes of series (parallel) systems arising out of different allocations of one or two standby redundancies. These comparisons are made with respect to the increasing concave (convex) order, the hazard rate order, and the stochastic precedence order. The main results extend some related conclusions in the literature.

In this work we provide sufficient conditions under which a general counting process stopped at a random time independent from the process belongs to the reliability decreasing reversed hazard rate (DRHR) or increasing failure rate (IFR) class. We also give some applications of these results in generalized renewal and trend renewal processes stopped at a random time.

We consider a multiclass single-server queueing network as a model of a packet switching network. The rates packets are sent into this network are controlled by queues which act as congestion windows. By considering a sequence of congestion controls, we analyse a sequence of stationary queueing networks. In this asymptotic regime, the service capacity of the network remains constant and the sequence of congestion controllers act to exploit the network's capacity by increasing the number of packets within the network. We show that the stationary throughput of routes on this sequence of networks converges to an allocation that maximises aggregate utility subject to the network's capacity constraints. To perform this analysis, we require that our utility functions satisfy an exponential concavity condition. This family of utilities includes weighted α-fair utilities for α > 1.

Optimal control of stochastic bandwidth-sharing networks is typically difficult. In order to facilitate the analysis, deterministic analogues of stochastic bandwidth-sharing networks, the so-called fluid models, are often taken for analysis, as their optimal control can be found more easily. The tracking policy translates the fluid optimal control policy back to a control policy for the stochastic model, so that the fluid optimality can be achieved asymptotically when the stochastic model is scaled properly. In this work we study the efficiency of the tracking policy, that is, how fast the fluid optimality can be achieved in the stochastic model with respect to the scaling parameter. In particular, our result shows that, under certain conditions, the tracking policy can be as efficient as feedback policies.

In this paper we consider a single-server queue with Lévy input, and, in particular, its workload process (Qt)t≥0, focusing on its correlation structure. With the correlation function defined as r(t):= cov(Q0, Qt) / varQ0 (assuming that the workload process is in stationarity at time 0), we first study its transform ∫0∞r(t)e-ϑtdt, both for when the Lévy process has positive jumps and when it has negative jumps. These expressions allow us to prove that r(·) is positive, decreasing, and convex, relying on the machinery of completely monotone functions. For the light-tailed case, we estimate the behavior of r(t) for large t. We then focus on techniques to estimate r(t) by simulation. Naive simulation techniques require roughly (r(t))-2 runs to obtain an estimate of a given precision, but we develop a coupling technique that leads to substantial variance reduction (the required number of runs being roughly (r(t))-1). If this is augmented with importance sampling, it even leads to a logarithmically efficient algorithm.

Customers arrive sequentially at times x1 < x2 < · · · < xn and stay for independent random times Z1, …, Zn > 0. The Z-variables all have the same distribution Q. We are interested in situations where the data are incomplete in the sense that only the order statistics associated with the departure times xi + Zi are known, or that the only available information is the order in which the customers arrive and depart. In the former case we explore possibilities for the reconstruction of the correct matching of arrival and departure times. In the latter case we propose a test for exponentiality.

We consider a d-dimensional reflected fractional Brownian motion (RFBM) process on the positive orthant S = R+d, with drift r0 ∈ Rd and Hurst parameter H ∈ (½, 1). Under a natural stability condition on the drift vector r0 and reflection directions, we establish a return time result for the RFBM process Z; that is, for some δ, κ > 0, supx∈BEx[τB(δ)] < ∞, where B = {x ∈ S : |x| ≤ κ} and τB(δ) = inf{t ≥ δ : Z(t) ∈ B}. Similar results are known for reflected processes driven by standard Brownian motions, and our result can be viewed as their FBM counterpart. Our motivation for this study is that RFBM appears as a limiting workload process for fluid queueing network models fed by a large number of heavy-tailed ON/OFF sources in heavy traffic.

Denote the Palm measure of a homogeneous Poisson process Hλ with two points 0 and x by P0,x. We prove that there exists a constant μ ≥ 1 such that P0,x(D(0, x) / μ||x||2 ∉ (1 − ε, 1 + ε) | 0, x ∈ C∞) exponentially decreases when ||x||2 tends to ∞, where D(0, x) is the graph distance between 0 and x in the infinite component C∞ of the random geometric graph G(Hλ; 1). We derive a large deviation inequality for an asymptotic shape result. Our results have applications in many fields and especially in wireless sensor networks.

This paper is concerned with the definition and calculation of containment probabilities for emerging disease epidemics. A general multitype branching process is used to model an emerging infectious disease in a population of households. It is shown that the containment probability satisfies a certain fixed point equation which has a unique solution under certain conditions; the case of multiple solutions is also described. The extinction probability of the branching process is shown to be a special case of the containment probability. It is shown that Laplace transform ordering of the severity distributions of households in different epidemics yields an ordering on the containment probabilities. The results are illustrated with both standard epidemic models and a specific model for an emerging strain of influenza.

We consider a generalized form of the coupon collection problem in which a random number, S, of balls is drawn at each stage from an urn initially containing n white balls (coupons). Each white ball drawn is colored red and returned to the urn; red balls drawn are simply returned to the urn. The question considered is then: how many white balls (uncollected coupons) remain in the urn after the kn draws? Our analysis is asymptotic as n → ∞. We concentrate on the case when kn draws are made, where kn / n → ∞ (the superlinear case), although we sketch known results for other ranges of kn. A Gaussian limit is obtained via a martingale representation for the lower superlinear range, and a Poisson limit is derived for the upper boundary of this range via the Chen-Stein approximation.

Following Baurdoux and Kyprianou (2008) we consider the McKean stochastic game, a game version of the McKean optimal stopping problem (American put), driven by a spectrally negative Lévy process. We improve their characterisation of a saddle point for this game when the driving process has a Gaussian component and negative jumps. In particular, we show that the exercise region of the minimiser consists of a singleton when the penalty parameter is larger than some threshold and ‘thickens’ to a full interval when the penalty parameter drops below this threshold. Expressions in terms of scale functions for the general case and in terms of polynomials for a specific jump diffusion case are provided.

We present a method for computing the probability density function (PDF) and the cumulative distribution function (CDF) of a nonnegative infinitely divisible random variable X. Our method uses the Lévy-Khintchine representation of the Laplace transform Ee-λX = e-ϕ(λ), where ϕ is the Laplace exponent. We apply the Post-Widder method for Laplace transform inversion combined with a sequence convergence accelerator to obtain accurate results. We demonstrate this technique on several examples, including the stable distribution, mixtures thereof, and integrals with respect to nonnegative Lévy processes.

We consider the sample paths of the order statistics of independent and identically distributed random variables with common distribution function F. If F is strictly increasing but possibly having discontinuities, we prove that the sample paths of the order statistics satisfy the large deviation principle in the Skorokhod M1 topology. Sanov's theorem is deduced in the Skorokhod M'1 topology as a corollary to this result. A number of illustrative examples are presented, including applications to the sample paths of trimmed means and Hill plots.

In extreme shock models, only the impact of the current, possibly fatal shock is usually taken into account, whereas in cumulative shock models, the impact of the preceding shocks is accumulated as well. A shock model which combines these two types is called a ‘combined shock model’. In this paper we study new classes of extreme shock models and, based on the obtained results and model interpretations, we extend these results to several specific combined shock models. For systems subject to nonhomogeneous Poisson processes of shocks, we derive the corresponding survival probabilities and discuss some meaningful interpretations and examples.

Kochar and Xu (2009) proved that a parallel system with heterogeneous exponential component lifetimes is more skewed (according to the convex transform order) than the system with independent and identically distributed exponential components. In this paper we extend this study to the general k-out-of-n systems for the case when there are only two types of component in the system. An open problem proposed in Pǎltǎnea (2008) is partially solved.

Jakeman's random walk model with step number fluctuations describes the coherent amplitude scattered from a rough medium in terms of the summation of individual scatterers' contributions. If the scattering population conforms to a birth-death immigration model, the resulting amplitude is K-distributed. In this context, we derive a class of diffusion processes as an extension of the ordinary birth-death immigration model. We show how this class encompasses four different cross-section models commonly studied in the literature. We conclude by discussing the advantages of this unified description.

It is well know that the expected exponentially discounted total reward for a stochastic process can also be defined as the expected total undiscounted reward earned before an independent exponential stopping time (let us call this the stopped reward). Feinberg and Fei (2009) recently showed that the variance of the discounted reward is smaller than the variance of the stopped reward. We strengthen this result to show that the discounted reward is smaller than the stopped reward in the convex ordering sense.