Financial crises under the microscope

New research centre at CBS to examine financial frictions and their role before and during financial crises

CBS has opened a new basic research centre with the purpose of contributing to a greater insight into financial crises. Professor David Lando is in charge of the Center for Financial Frictions He has chosen to concentrate his research on financial frictions. Frictions affect the price of securities and can play an important part in the development of financial crises.

- They may be capital requirements for financial institutions, measures against shortselling, tax on equity trading (Tobin tax), limited possibilities of negotiating financial assets, the consequence of credit risks or differences in the information to market participants, says David Lando. All of the above are possible areas of research.

The Danish National Research Foundation has granted the Center for Financial Frictions DKK 48 million to support six years of research with a possibility to prolong the grant for four more years.

A strong team

Professor Lasse Heje Pedersen, Professor Søren Hvidkjær, Professor Kristian Miltersen and Associate Professor Jesper Lund from CBS are affiliated with the centre. Peter N. Sørensen from the University of Copenhagen and researchers from foreign universities will also be participating in the centre's activities.

- It is my hope that the centre's research can contribute to a better understanding of how financial crises arise, how the markets react during a crisis and what legislators, central banks and other authorities can do to slow down the development of a crisis, says David Lando.

The Center for Financial Frictions will invite visiting professors and organise conferences with leading international researchers and seminars where experts from the financial sector can share their knowledge with students, lecturers and researchers.