Biography

Lasse H. Pedersen is the John A. Paulson Professor of Finance and Alternative Investments at New York University Leonard N. Stern School of Business and a research associate at CEPR and NBER.

Professor Pedersen is part of the Liquidity Working Group meeting at the Federal Reserve Bank of New York to address liquidity issues. He also serves on the New York Fed's Monetary Policy Panel, on the Board of Directions of the American Finance Association, the Economic Advisory Boards of Nasdaq and FTSE, as a principal at AQR Capital Management, and as associate editor at The Journal of Finance, Journal of Economic Theory and The Review of Asset Pricing Studies. His academic awards include the Fama/DFA First Prize for the best papers published in the Journal of Financial Economics.

Professor Pedersen's research focuses on liquidity risk. It shows that a security's required return is increased by market liquidity risk (as captured by the liquidity-adjusted capital asset pricing model) and funding liquidity risk (as captured by the margin CAPM), and how the interaction of market and funding liquidity can create liquidity spirals and systemic financial crisis. Indeed, when everyone runs for the exit, prices drop-and-rebound, margins increase, and risk management tighten. These liquidity risk models can help explain equity returns, option prices, bond yields, currency crashes, valuation in OTC search markets, the CDS-bond basis and other failures of the Law of One Price, the effect of unconventional monetary policy such as central banks' lending facilities, betting against beta returns, predatory trading, value and momentum, shortselling, optimal dynamic trading, and other benefits of a realistic departure from classic frictionless finance theory.

Professor Pedersen received his B.S. and M.S. from University of Copenhagen and his Ph.D. from Stanford Graduate School of Business.

Research Interests

• Liquidity Crisis
• Asset Pricing with Liquidity Risk
• Systemic Risk and Capital Mobility
• Strategic Trading and Portfolio Selection
• Equilibrium with Margin Constraints and Trading Frictions
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Courses Taught

• Foundations of Financial Markets
• Hedge Fund Strategies
• Liquidity and Asset Pricing
• Topics in Asset Pricing
• Topics in Hedge Fund Strategies

Academic Background

Ph.D., Finance, 2001
Stanford University

M.S., Mathematics-Economics, 1997
University of Copenhagen, Denmark

B.A., Mathematics-Economics, 1995
University of Copenhagen, Denmark

Awards & Appointments

Selected Publications

Markus Brunnermeier and Lasse H. Pedersen (2009)
Market Liquidity and Funding Liquidity
The Review of Financial Studies, 22, 2201-2238

Viral Acharya and Lasse Heje Pedersen (2005)
Asset Pricing with Liquidity Risk
Journal of Financial Economics, 77, 375-410

Darrell Duffie, Nicolae Garleanu, and Lasse Heje Pedersen (2005)
Over-the-Counter Markets
Econometrica, 73, 1815-1847