Lasse H. Pedersen
Visiting Fellow, Oct. 5–14, 2011
John A. Paulson Professor of Finance and Alternative Investments, New York University Stern School of Business
Lasse Pedersen’s research focuses on liquidity risk. His work has shown how the interaction of market and funding liquidity can create liquidity spirals and systemic financial crisis. For instance, his recent paper, “When Everyone Runs for the Exit,” describes how prices drop and rebound, margins increase, and risk management tightens when investors flee the market. Another paper, “Two Monetary Tools: Interest Rates and Haircuts”, presents a macro model and empirical evidence on how central banks can mitigate such liquidity crises. His liquidity risk models also help explain equity returns, option prices, bond yields, currency crashes, valuation in OTC search markets, and failures of the Law of One Price.
Pedersen is among a group of leading economists who are departing from classic frictionless economics to study how frictions like the lack of liquidity and credit can affect asset prices and create a drag on the economy. The relevance of this work is highlighted by the widespread financial crisis seen across markets in 2007; with Bengt Holmstrom of MIT and Markus Brunnermeier of Princeton, Pedersen is part of a working group meeting regularly at the Federal Reserve Bank of New York to address liquidity issues. He also serves on the Monetary Policy Panel for the New York Fed.
Pedersen joined the NYU faculty in 2001. He is a research associate with the National Bureau of Economic Research and a research affiliate with the Centre for Economic Policy Research. He also is an associate editor for the Journal of Finance, the Journal of Economic Theory, and the Review of Asset Pricing Studies, and serves on the Economic Advisory Boards of NASDAQ OMX and FTSE.
He received his PhD from the Stanford Graduate School of Business and his bachelor’s and master’s degrees in mathematics-economics from University of Copenhagen.