Different virtual machines can share servers, subject to resource constraints. Incoming jobs whose resource requirements cannot be satisfied are queued and receive service according to a preemptive-resume scheduling policy. The problem is to evaluate a cost function, including holding and server costs, with a view to searching for the optimal number of servers. A model with two job types is analyzed exactly and the results are used to develop accurate approximations, which are then extended to more than two classes. Numerical examples and comparisons with simulations are presented.

We consider the problem of routing and admission control in a loss system featuring two classes of arriving jobs (high-priority and low-priority jobs) and two types of servers, in which decision-making for high-priority jobs is forced, and rewards influence the desirability of each of the four possible routing decisions. We seek a policy that maximizes expected long-run reward, under both the discounted reward and long-run average reward criteria, and formulate the problem as a Markov decision process. When the reward structure favors high-priority jobs, we demonstrate that there exists an optimal monotone switching curve policy with slope of at least −1. When the reward structure favors low-priority jobs, we demonstrate that the value function, in general, lacks structure, which complicates the search for structure in optimal policies. However, we identify conditions under which optimal policies can be characterized in greater detail. We also examine the performance of heuristic policies in a brief numerical study.

In a family, parameterized by θ, of non-negative random variables with finite, positive second moment, Taylor's law (TL) asserts that the population variance is proportional to a power of the population mean as θ varies: σ2 (θ) = a[μ(θ)]b, a > 0. TL, sometimes called fluctuation scaling, holds widely in science, probability theory, and stochastic processes. Here we report diverse examples of TL with b = 2 (equivalent to a constant coefficient of variation) arising from a difference of random variables in normed vector spaces of dimension 1 and larger. In these examples, we compute a exactly using, in some cases, a simple, new technique. These examples may prove useful in future models that involve differences of random variables, including models of the spatial distribution and migration of human populations.

In many scheduling applications, minimizing delays is of high importance. One adverse effect of such delays is that the reward for completion of a job may decay over time. Indeed in healthcare settings, delays in access to care can result in worse outcomes, such as an increase in mortality risk. Motivated by managing hospital operations in disaster scenarios, as well as other applications in perishable inventory control and information services, we consider non-preemptive scheduling of jobs whose internal value decays over time. Because solving for the optimal scheduling policy is computationally intractable, we focus our attention on the performance of three intuitive heuristics: (1) a policy which maximizes the expected immediate reward, (2) a policy which maximizes the expected immediate reward rate, and (3) a policy which prioritizes jobs with imminent deadlines. We provide performance guarantees for all three policies and show that many of these performance bounds are tight. In addition, we provide numerical experiments and simulations to compare how the policies perform in a variety of scenarios. Our theoretical and numerical results allow us to establish rules-of-thumb for applying these heuristics in a variety of situations, including patient scheduling scenarios.

Previous studies on emergency management of large-scale urban networks have commonly concentrated on system development to off-load intensive computations to remote cloud servers or improving communication quality during a disaster and ignored the effect of energy consumption of vehicles, which can play a vital role in large-scale evacuation owing to the disruptions in energy supply. Hence, in this paper we propose a cloud-enabled navigation system to direct vehicles to safe areas in the aftermath of a disaster in an energy and time efficient fashion. A G-network model is employed to mimic the behaviors and interactions between individual vehicles and the navigation system, and analyze the effect of re-routing decisions toward the vehicles. A gradient descent optimization algorithm is used to gradually reduce the evacuation time and fuel consumption of vehicles by optimizing the probabilistic choices of linked road segments at each intersection. The re-routing decisions arrive at the intersections periodically and will expire after a short period. When a vehicle reaches an intersection, if the latest re-routing decision has not expired, the vehicle will follow this advice, otherwise, the vehicle will stick to the shortest path to its destination. The experimental results indicate that the proposed algorithm can reduce the evacuation time and the overall fuel utilization especially when the number of evacuated vehicles is large.

We consider the problem of optimally replacing multiple stochastically degrading systems using condition-based maintenance. Each system degrades continuously at a rate that is governed by the current state of the environment, and each fails once its own cumulative degradation threshold is reached. The objective is to minimize the sum of the expected total discounted setup, preventive replacement, reactive replacement, and downtime costs over an infinite horizon. For each environment state, we prove that the cost function is monotone nondecreasing in the cumulative degradation level. Additionally, under mild conditions, these monotonicity results are extended to the entire state space. In the case of a single system, we establish that monotone policies are optimal. The monotonicity results help facilitate a tractable, approximate model with state- and action-space transformations and a basis-function approximation of the action-value function. Our computational study demonstrates that high-quality, near-optimal policies are attainable and significantly outperform heuristic policies.

In this paper, some results on the complete moment convergence for arrays of rowwise negatively associated (NA, for short) random variables are established. The results obtained in this paper correct the corresponding one obtained in Ko [13] and also improve and generalize the corresponding ones of Kuczmaszewska [14] and Ko [13]. As an application of the main results, we present a result on complete consistency for the estimator in a non-parametric regression model based on NA errors. Finally, we provide a numerical simulation to verify the validity of our result.

For a Markov chain on a finite partially ordered state space, we show that its Siegmund dual exists if and only if the chain is Möbius monotone. This is an extension of Siegmund's result for totally ordered state spaces, in which case the existence of the dual is equivalent to the usual stochastic monotonicity. Exploiting the relation between the stationary distribution of an ergodic chain and the absorption probabilities of its Siegmund dual, we present three applications: calculating the absorption probabilities of a chain with two absorbing states knowing the stationary distribution of the other chain; calculating the stationary distribution of an ergodic chain knowing the absorption probabilities of the other chain; and providing a stable simulation scheme for the stationary distribution of a chain provided we can simulate its Siegmund dual. These are accompanied by concrete examples: the gambler's ruin problem with arbitrary winning/losing probabilities; a non-symmetric game; an extension of a birth and death chain; a chain corresponding to the Fisher–Wright model; a non-standard tandem network of two servers, and the Ising model on a circle. We also show that one can construct a strong stationary dual chain by taking the appropriate Doob transform of the Siegmund dual of the time-reversed chain.

In this paper, we study the almost sure convergence for sequences of asymptotically negative associated (ANA) random variables. As a result, we extend the classical Khintchine–Kolmogorov convergence theorem, Marcinkiewicz strong law of large numbers, and the three series theorem for sequences of independent random variables to sequences of ANA random variables without necessarily adding any extra conditions.

The coefficient of tail dependence is a quantity that measures how extreme events in one component of a bivariate distribution depend on extreme events in the other component. It is well known that the Gaussian copula has zero tail dependence, a shortcoming for its application in credit risk modeling and quantitative risk management in general. We show that this property is shared by the joint distributions of hitting times of bivariate (uniformly elliptic) diffusion processes.

Relying only on the classical Bahadur–Rao approximation for large deviations (LDs) of univariate sample means, we derive strong LD approximations for probabilities involving two sets of sample means. The main result concerns the exact asymptotics (as n→∞) of

$$ {\open P}\left({\max_{i\in\{1,\ldots,d_x\}}\bar X_{i,n} \les \min_{i\in\{1,\ldots,d_y\}}\bar Y_{i,n}}\right),$$

${\bar X}_{i,n}{\rm s}$

${\bar Y}_{i,n}{\rm s}$

${\open E}X \gt {\open E}Y$

From health care to maintenance shops, many systems must contend with allocating resources to customers or jobs whose initial service requirements or costs change when they wait too long. We present a new queueing model for this scenario and use a Markov decision process formulation to analyze assignment policies that minimize holding costs. We show that the classic cμ rule is generally not optimal when service or cost requirements can change. Even for a two-class customer model where a class 1 task becomes a class 2 task upon waiting, we show that additional orderings of the service rates are needed to ensure the optimality of simple priority rules. We then show that seemingly-intuitive switching curve structures are also not optimal in general. We study these scenarios and provide conditions under which they do hold. Lastly, we show that results from the two-class model do not extend to when there are n≥3 customer classes. More broadly, we find that simple priority rules are not optimal. We provide sufficient conditions under which a simple priority rule holds. In short, allowing service and/or cost requirements to change fundamentally changes the structure of the optimal policy for resource allocation in queueing systems.

In this paper, we present a new pricing model for vulnerable options, with time-varying variances for each asset described by Generalized Autoregressive Conditional Heteroscedasticity processes and correlated with the return of the asset. By connecting the underlying asset and the counterparty's assets through the market factor channel, the proposed model also captures stochastic correlation between the underlying asset return and the return of the counterparty's assets. The correlation depends on the levels of the variances of both assets and the market index as well. In the proposed framework, the closed-form solution for vulnerable options is derived and numerical results are presented to investigate the impact of counterparty default risk.

In a rare life-threatening disease setting the number of patients in the trial is a high proportion of all patients with the condition (if not all of them). Further, this number is usually not enough to guarantee the required statistical power to detect a treatment effect of a meaningful size. In such a context, the idea of prioritizing patient benefit over hypothesis testing as the goal of the trial can lead to a trial design that produces useful information to guide treatment, even if it does not do so with the standard levels of statistical confidence. The idealized model to consider such an optimal design of a clinical trial is known as a classic multi-armed bandit problem with a finite patient horizon and a patient benefit objective function. Such a design maximizes patient benefit by balancing the learning and earning goals as data accumulates and given the patient horizon. On the other hand, optimally solving such a model has a very high computational cost (many times prohibitive) and more importantly, a cumbersome implementation, even for populations as small as a hundred patients. Several computationally feasible heuristic rules to address this problem have been proposed over the last 40 years in the literature. In this paper, we study a novel heuristic approach to solve it based on the reformulation of the problem as a Restless bandit problem and the derivation of its corresponding Whittle Index (WI) rule. Such rule was recently proposed in the context of a clinical trial in Villar, Bowden, and Wason [16]. We perform extensive computational studies to compare through both exact value calculations and simulated values the performance of this rule, other index rules and simpler heuristics previously proposed in the literature. Our results suggest that for the two and three-armed case and a patient horizon less or equal than a hundred patients, all index rules are a priori practically identical in terms of the expected proportion of success attained when all arms start with a uniform prior. However, we find that a posteriori, for specific values of the parameters of interest, the index policies outperform the simpler rules in every instance and specially so in the case of many arms and a larger, though still relatively small, total number of patients with the diseases. The very good performance of bandit rules in terms of patient benefit (i.e., expected number of successes and mean number of patients allocated to the best arm, if it exists) makes them very appealing in context of the challenge posed by drug development and treatment for rare life-threatening diseases.

Various types of systems across a broad range of disciplines contain tandem queues with nested sessions. Strong dependence between the servers has proved to make such networks complicated and difficult to study. Exact analysis is in most of the cases intractable. Moreover, even when performance metrics such as the saturation throughput and the utilization rates of the servers are known, determining the limiting factor of such a network can be far from trivial. In our work, we present a simple, tractable and nevertheless relatively accurate method for approximating the above mentioned performance measurements for any server in a given network. In addition, we propose an extension to the intuitive “slowest server rule” for identification of the bottleneck, and show through extensive numerical experiments that this method works very well.

We consider a single-item, two-echelon spare parts inventory model for repairable parts for capital goods with high downtime costs. The inventory system consists of multiple local warehouses, a central warehouse, and a central repair facility. When a part at a customer fails, if possible his request for a ready-for-use part is fulfilled by his local warehouse. Also, the failed part is sent to the central repair facility for repair. If the local warehouse is out of stock, then, via an emergency shipment, a ready-for-use part is sent from the central warehouse if it has a part in stock. Otherwise, it is sent via a lateral transshipment from another local warehouse, or via an emergency shipment from the external supplier. We assume Poisson demand processes, generally distributed leadtimes for replenishments, repairs, and emergency shipments, and a basestock policy for the inventory control.

Our inventory system is too complex to solve for a steady-state distribution in closed form. We approximate it by a network of Erlang loss queues with hierarchical jump-over blocking. We show that this network has a product-form steady-state distribution. This enables an efficient heuristic for the optimization of basestock levels, resulting in good approximations of the optimal costs.

In this paper, we investigate executive stock options with endogenous departure and time-varying variances. We use a “Generalized Autoregressive Conditional Heteroskedasticity” process to capture the variance process of the log stock price. In addition, we take into consideration the departure risk of the executive and assume that the probability of remaining employed has a power form of stock price ratios. After deriving the closed-form pricing formulae of executive stock options, we illustrate the effects of the departure risk on the values of executive stock options.

Cossette, Marceau, and Perreault derived formulas for aggregation and capital allocation based on risks following two bivariate exponential distributions. Here, we derive formulas for aggregation and capital allocation for 18 mostly commonly known families of bivariate distributions. This collection of formulas could be a useful reference for financial risk management.

We consider systems based on sequential order statistics (SOS) with underlying distributions possessing proportional hazard rates (PHRs). In that case, the lifetime distribution of the system can be expressed as a distorted distribution. Motivated by the distribution structure in the case of pairwise different model parameters, a particular class of distorted distributions, the generalized PHR model, is introduced and characterizations of stochastic comparisons for several stochastic orders are obtained. Moreover, results on the asymptotic behavior of some aging characteristics, for example, the hazard rate and the mean residual life function, of general distorted distributions as well as related bounds are given. The results are supplemented with limiting properties of the systems in the case of possibly equal model parameters. Some examples are presented in order to illustrate the application of the findings to systems based on SOS and also to systems with independent heterogeneous components.

In this paper, we establish a fluid limit for a two-sided Markov order book model. The main result states that in a certain asymptotic regime, a pair of measure-valued processes representing the “sell-side shape” and “buy-side shape” of an order book converges to a pair of deterministic measure-valued processes in a certain sense. We also test the fluid approximation on data. The empirical results suggest that the approximation is reasonably good for liquidly traded stocks in certain time periods.