This manual describes the usage of the accompanying freely available software package for estimation and testing in the fractionally cointegrated vector autoregressive (VAR) model. -- cofractional process ; cointegration rank ; fractional autoregressive model ; fractional cointegration ;...

We formulate a measure of information efficiency in a general, no-arbitrage semimartingale model of the price process. The market quality measure is applied to a high-frequency dataset from the interdealer FX market to identify changes in market efficiency after a decimalization of tick size.

We consider a financial network where banks are heterogeneous in scales and each bank has only local knowledge regarding the network. Each bank must make counterparty and portfolio decisions while facing uncertainty regarding the network structure. Such uncertainty plays an important role in...

This paper develops a model of the optimal timing of interest rate changes. With fixed adjustment costs and ongoing uncertainty, changing the interest rate involves the exercise of an option. Optimal policy therefore has a “wait- and-see” component, which can be quantified using option...

We examine the role of algorithmic traders as arbitrageurs and their impact on price efficiency in the interdealer foreign exchange market. Algorithmic traders do not improve price efficiency by detecting and exploiting mis-priced currency pairs. To the contrary, algorithmic traders contribute...