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Property Derivatives for Managing European Real‐Estate Risk
Author(s) -
Fabozzi Frank J.,
Shiller Robert J.,
Tunaru Radu S.
Publication year - 2010
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2009.00528.x
Subject(s) - real estate , business , market liquidity , real estate investment trust , capitalization rate , lagging , derivatives market , financial economics , asset (computer security) , derivative (finance) , property (philosophy) , finance , actuarial science , monetary economics , economics , computer science , futures contract , mathematics , philosophy , statistics , computer security , epistemology
Although property markets represent a large proportion of total wealth in developed countries, the real‐estate derivatives markets are still lagging behind in volume of trading and liquidity. Over the last few years there has been increased activity in developing derivative instruments that can be utilised by asset managers. In this paper, we discuss the problems encountered when using property derivatives for managing European real‐estate risk. We also consider a special class of structured interest rate swaps that have embedded real‐estate risk and propose a more efficient way to tailor these swaps .