Darrell Duffie

Senior Fellow
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Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University's Graduate School of Business, professor (by courtesy) at the Department of Economics, and Senior Fellow (by courtesy) at the Hoover Institution.

Duffie is a fellow of the Econometric Society, a research fellow of the National Bureau of Economic Research, and a fellow of the American Academy of Arts and Sciences. He was the 2009 president of the American Finance Association. From October 2008 to April 2018 Duffie was a member of the board of directors of Moody’s Corporation. From 2013 to 2017 he chaired the Financial Stability Board’s Market Participants Group on Reference Rate Reform.

Duffie’s recent work focuses on the design and regulation of capital markets. His research is published in Econometrica, Journal of Political Economy, and Journal of Finance, among other journals. His most recent books are How Big Banks Fail: And What to Do about It (Princeton University Press, 2010), Measuring Corporate Default Risk (Oxford University Press, 2011), and Dark Markets: Asset Pricing and Information Trasmission in Over-the-Counter Markets (Princeton University Press, 2012).

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Recent Commentary

Papers And Presentations

Lessons From The Crisis

by Darrell Duffievia Revisiting the 2008 Financial Crisis
Friday, December 7, 2018

In the years leading up to the financial crisis that began in 2007, the core of the financial system was vulnerable to major shocks emanating from any of a variety of sources. This presentation reviews the lessons from the crisis.

Prone to Fail: The Pre-Crisis Financial System

by Darrell Duffievia Stanford Graduate School of Business
Thursday, July 19, 2018

In the years leading up to the financial crisis that began in 2007, the core of the financial system was vulnerable to major shocks emanating from any of a variety of sources. While this particular crisis was triggered by over-levered home owners and a severe downturn in U.S. housing markets (Mian and Sufi, 2015), a reasonably well supervised financial system would have been much more resilient to this and other types of severe shocks. (Slides)

Post-Crisis Bank Regulations and Financial Market Liquidity

by Darrell Duffievia Baffi Lecture, Banca d’Italia in Rome
Saturday, March 31, 2018

This is the manuscript of the Baffi Lecture that I delivered at Banca d’Italia in September 2017. I address the implications for financial-market liquidity of post-crisis capital and failureresolution rules for systemically important banks. I focus especially on over-the-counter (OTC) markets, which handle most of the world’s trade in bonds, repos, swaps, commodities, and foreign exchange.

Why the leverage ratio distorts market-making

by Darrell Duffievia Risk.net
Tuesday, January 3, 2017

Big increases in the capital requirements of bank-affiliated dealers have drained liquidity from over-the-counter markets, especially for products that occupy a lot of space on dealer balance sheets, such as bonds, swaps, repos and foreign exchange contracts.

Passthrough Efficiency in the Fed’s New Monetary Policy Setting

by Darrell Duffie, Arvind Krishnamurthyvia Jackson Hole Symposium of the Federal Reserve Bank of Kansas City
Tuesday, August 30, 2016

We show how the current institutional setting of U.S.-dollar money markets limits the passthrough effectiveness of the Federal Reserve’s monetary policy. We focus on frictions associated with imperfect competition, regulation, infrastructure, and other forms of institutional segmentation within money markets. We model how imperfect competition is exacerbated by costs to cash investors associated with search and information attention. Bloomberg radio interview (audio).

Financial regulatory reform after the crisis: an assessment

by Darrell Duffievia 2016 ECB Forum on Central Banking, Sintra, Portugal
Wednesday, June 1, 2016

This report offers a brief assessment of the post-crisis regulatory reform of the financial system: the most sweeping re-regulation of banking and financial markets since the US “New Deal” reforms2 conducted during the Great Depression. (Presentation slidespresentation video, beginning at minute 5:00).

Systemic Risk In Financial Systems And Capital Markets In Relationship With The Proposed Draft Capital Markets Stability Act

by Darrell Duffievia Canada's Department of Justice
Tuesday, May 3, 2016

Le présent rapport examine certaines questions relatives à l’ébauche d’avant-projet de la Loi sur la stabilité des marchés des capitaux (LSMC). Les enjeux liés à la LSMC ne sont pas étudiés de façon exhaustive dans ce rapport. Il s’agit d’un rapport parmi plusieurs rapports d’experts, chacun traitant d’un sous-ensemble de questions. 

Submission in Response to U.S. Treasury Notice Seeking Public Comment on the Evolution of the Treasury Market Structure

by Darrell Duffievia Stanford Graduate School of Business
Sunday, April 24, 2016

I am grateful to be permitted to submit this response. I will address only a narrow set of issues related to the liquidity of secondary markets for treasuries. Secondary treasury market efficiency has been of increasing concern to me over the past decade, and especially over the past five years. I believe changes in market performance are due to a number of factors, among which the two most important are the following.

Why Are Big Banks Offering Less Liquidity To Bond Markets?

by Darrell Duffievia Forbes
Friday, March 11, 2016

Almost every day we read another salvo of arguments in the debate over whether bond market liquidity has been harmed by new banking regulations. Based on bid-ask spreads and most other standard liquidity metrics, bond markets appear to be about as liquid as they have been for a long time. Liquidity is worse, however, for larger-sized trades. If necessary to achieve financial stability, this is a cost well worth bearing.