  For vanilla derivatives that constitute the bulk of investment banks' hedging
portfolios, central clearing through central counterparties (CCPs) has become
hegemonic. A key mandate of a CCP is to provide an efficient and proper
clearing member default resolution procedure. When a clearing member defaults,
the CCP can hedge and auction or liquidate its positions. The counterparty
credit risk cost of auctioning has been analyzed in terms of XVA metrics in
Bastide, Cr{\'e}pey, Drapeau, and Tadese (2023). In this work we assess the
costs of hedging or liquidating. This is done by comparing pre- and
post-default market equilibria, using a Radner equilibrium approach for
portfolio allocation and price discovery in each case. We show that the Radner
equilibria uniquely exist and we provide both analytical and numerical
solutions for the latter in elliptically distributed markets. Using such tools,
a CCP could decide rationally on which market to hedge and auction or liquidate
defaulted portfolios.
