Lasse Heje Pedersen

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Lasse H. Pedersen
Born Copenhagen, Denmark
Nationality Danish
Fields Financial Economics
Alma mater

Stanford University Graduate School of Business

University of Copenhagen
Doctoral advisor Darrell Duffie, Kenneth Singleton
Notable awards Bernácer Prize, Fama-DFA Prize, Michael Brennan Award

Lasse Heje Pedersen (born October 3, 1972) is a Danish financial economist known for his research on liquidity risk and asset pricing. He is the John A. Paulson Professor of Finance and Alternative Investments at the New York University Stern School of Business. He has also served in the monetary policy panel and liquidity working group at the Federal Reserve Bank of New York and is a principal at AQR Capital Management.

He was the winner of the 2011 Bernacer Prize to the best European economist under the age of 40 for his original research contributions on how the interaction between market liquidity risk and funding liquidity risk can create liquidity spirals and systemic financial crises.[1]

Education and academic career[edit]

After completing his bachelor's and master's degrees in mathematics and economics at the University of Copenhagen in 1997, he went to Stanford University and earned a Ph.D. in finance in 2001. Upon graduation he started as assistant professor at the New York University Stern School of Business where he got tenure in 2005 and now holds a position as chaired professor. His research has been cited by central bankers such as Fed Chairman Bernanke[2] and in the press, including The Economist,[3] New York Times,[4] Forbes,[5] and Financial Times.[6]

Market and Funding Liquidity Risk[edit]

Lasse H. Pedersen's research shows that investors need to be compensated for incurring trading costs and the risk of rising trading costs. Therefore, securities with higher market liquidity risk have higher required return, as per the liquidity-adjusted CAPM.[7]

Further, many investors face funding constraints (e.g., leverage constraints and margin requirements), and funding liquidity problems affect security prices. Funding constraints raise the required return for securities with high margin requirements [8] or low risk.[9]

His research shows how the interaction between market and funding liquidity risk can create liquidity spirals and liquidity crises.[10] Liquidity problems affect the macro economy and imply that monetary authorities can manage leverage and margin requirements as a second monetary tool.[11]

References[edit]

  1. ^ http://www.bernacerprize.org/2011_Pedersen
  2. ^ http://www.federalreserve.gov/newsevents/speech/bernanke20120413a.htm
  3. ^ http://www.economist.com/specialreports/displaystory.cfm?story_id=15474125
  4. ^ https://www.nytimes.com/2009/08/09/business/economy/09stra.html?_r=1
  5. ^ http://www.forbes.com/global/2009/0608/foreign-exchange-devaluation-buy-junky-currencies.html
  6. ^ http://www.ft.com/cms/s/0/8510b958-9aad-11e1-9c98-00144feabdc0.html
  7. ^ Viral Acharya and Lasse Heje Pedersen (2005), "Asset Pricing with Liquidity Risk," Journal of Financial Economics, 77, 375-410. http://pages.stern.nyu.edu/%7Elpederse/papers/liquidity_risk.pdf
  8. ^ Nicolae Garleanu and Lasse Heje Pedersen (2011), "Margin-Based Asset Pricing and Deviations from the Law of One Price," The Review of Financial Studies, 24(6), 1980-2022. http://pages.stern.nyu.edu/%7Elpederse/papers/MarginPricingLoOP.pdf
  9. ^ Andrea Frazzini and Lasse Heje Pedersen (2010), "Betting Against Beta". http://pages.stern.nyu.edu/~lpederse/papers/BettingAgainstBeta.pdf
  10. ^ Markus Brunnermeier and Lasse H. Pedersen (2009), "Market Liquidity and Funding Liquidity," The Review of Financial Studies, 22, 2201-2238. http://pages.stern.nyu.edu/%7Elpederse/papers/Mkt_Fun_Liquidity.pdf
  11. ^ Adam Ashcraft, Nicolae Garleanu, and Lasse H. Pedersen (2010), "Two Monetary Tools: Interest Rates and Haircuts," NBER Macroeconomics Annual, 25, 143-180. http://pages.stern.nyu.edu/~lpederse/papers/TwoMonetaryTools.pdf

External links[edit]