Biographical note: DuffieDarrell: Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University's Graduate School of Business. His books include "How Big Banks Fail and What to Do about It" and "Dynamic Asset Pricing Theory" (both Princeton).

Dealer banks--that is, large banks that deal in securities and derivatives, such as J. P. Morgan and Goldman Sachs--are of a size and complexity that sharply distinguish them from typical commercial banks. When they fail, as we saw in the global financial crisis, they pose significant risks to...

Post-crisis capital regulations and new failure-resolution rules increased the funding costs that are borne by bank shareholders, and thus the cost to buy-side firms for access to space on the balance sheets of large banks. A policy implication is the encouragement of market infrastructure and...

We examine the properties of a method for fixing Libor rates that is based on transactions data and multi-day sampling windows. The use of a sampling window may mitigate problems caused by thin transaction volumes in unsecured wholesale term funding markets. Using two partial data sets of loan...

We use an extensive data set of bilateral exposures on credit default swap (CDS) to estimate the impact on collateral demand of new margin and clearing practices and regulations. We decompose collateral demand for both customers and dealers into several key components, including the “velocity...

We present a model for the equilibrium movement of capital between asset markets that are distinguished only by the levels of capital invested in each. Investment in that market with the greatest amount of capital earns the lowest risk premium. Intermediaries optimally trade off the costs of...

In the wake of the recent financial crisis, over-the-counter (OTC) derivatives have been blamed for increasing systemic risk. Although OTC derivatives were not a central cause of the crisis, the complexity and limited transparency of the market reinforced the potential for excessive risk-taking,...