Mitigating Fire Sales with a Central Clearing Counterparty

50 Pages Posted: 11 Apr 2019 Last revised: 21 Feb 2023

Multiple version iconThere are 2 versions of this paper

Date Written: August 10, 2020


I argue that one rationale for central clearing counterparties (CCPs) is to mitigate inefficiencies associated with distressed asset sales. First, I build a simple model where asset sales give rise to multiple equilibria, and show that a contract resembling a CCP ensures coordination on the Pareto-dominating equilibrium. Second, I empirically study the first event in economic history during which a CCP successfully eliminated inefficient asset sales: the global wool crisis of 1900.

Keywords: fire sales, liquidity, central clearing, CCP

JEL Classification: G23, G10

Suggested Citation

Vuillemey, Guillaume, Mitigating Fire Sales with a Central Clearing Counterparty (August 10, 2020). Available at SSRN: or

Guillaume Vuillemey (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

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