This paper studies the impact of long-range-dependent (LRD) traffic on the performance of a network multiplexer. The network multiplexer is characterized by a multiplexing queue with a finite buffer and an M/G/∞ input process. Our analysis expresses the loss probability bounds using a simple relationship between loss probability and buffer full probability. Our analysis also derives an exact ex...

The optimal policy response to a low-probability extreme event is examined. A simple policy problem is solved for a sequence of different loss functions: quadratic, combined quadratic/absolute-deviation, absolute-deviation, combined quadratic/constant, and perfectionist. The paper shows that, under some simplifying assumptions, each of these loss functions puts less weight on a low-probability ...

Recent studies show that loss probability (LP) is a decisive factor when people evaluate assets in laboratory experiments, suggesting positive relationship between LP and expected stock returns. This corresponds to the classical “Safety-First” principle. We find strong empirical support for this prediction U.S. market. During our sample period, average risk-adjusted return differences stocks tw...