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A 30-year perspective on property derivatives: what can be done to tame property price risk?

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Version 2 2023-06-07, 08:53
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journal contribution
posted on 2023-06-07, 08:53 authored by Frank J Fabozzi, Robert J Shiller, Radu TunaruRadu Tunaru
The housing sector is the largest spot market in the world without a developed derivative contract to serve the risk management needs of market participants. This paper describes the evolution within a wider economic context of property derivatives in the United States and worldwide. We review various economic arguments presented in the literature to highlight the advantages of these financial instruments to society. The paper also provides a critical perspective on the principal obstacles hindering the development of property derivatives based on real estate prices—especially housing prices—and what can be done to overcome these difficulties. The issues discussed can serve as a guide for designing property derivatives capable of hedging real estate risk that has resurfaced time and time again in financial crises.

History

Publication status

  • Published

File Version

  • Published version

Journal

Journal of Economic Perspectives

ISSN

0895-3309

Publisher

American Economic Association

Issue

4

Volume

34

Page range

121-145

Department affiliated with

  • Accounting and Finance Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2020-07-23

First Open Access (FOA) Date

2020-11-06

First Compliant Deposit (FCD) Date

2020-07-23

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