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Property Derivatives: Pricing, Hedging and Applications

Property Derivatives: Pricing, Hedging and Applications

Juerg M. Syz

ISBN: 978-0-470-69455-8

Dec 2008

252 pages



Property derivatives have the potential to revolutionize real estate - the last major asset class without a liquid derivatives market. The new instruments offer ease and flexibility in the management of property risk and return.

Property funds, insurance companies, pension and life funds, speculators, hedge funds or any asset manager with a view on the real estate market can apply the new derivatives to hedge property risk, to invest synthetically in real estate, or for portfolio optimization. Moreover, developers, builders, home suppliers, occupiers, banks, mortgage lenders and governmental agencies can better cope with their real estate exposure using property derivatives.

This book is a practical introduction to property derivatives and their numerous applications. Providing a comprehensive overview of the property derivatives market and indices, there is also in-depth coverage of pricing, hedging and risk management, which will deepen the readers understanding of the market's mechanisms.

Covering both the theoretical and practical aspects of the property derivatives markets; this book is the definitive reference guide to a new and fast-growing market.


Part I: Introduction to Property Derivatives.

1. A Finance View on the Real Estate Market.

2. Basic Derivative Instruments.

3. Rationales for Property Derivatives.

4. Hurdles for Property Derivatives.

5. Experience in Property Derivatives.

6. Underlying Indices.

Part II: Pricing, Hedging and Risk Management.

7. Index Dynamics.

8. The Property Spread.

9. Pricing Property Derivatives n Established Markets.

10. Measuring and Managing Risk.

11. Decomposing a Property Index.

12. Pricing and Hedging in Incomplete Markets.

Part III: Applications.

13. Range of Applications.

14. Investing in Real Estate.

15. Hedging Real Estate Exposure.

16. Management of Real Estate Portfolios.

17. Corporate Applications.

18. Indexed Building Savings.

19. Home Equity Insurance.