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Thursday, April 27, 2006

futures and options contracts...on real estate

This Boston Globe article informs us that we'll soon be able to hedge our real estate bets using derivatives. This could be a very useful development. It's certainly interesting how these financial instruments are coming out just as the real estate bubble begins to deflate.
America's sprawling financial markets give investors the opportunity to hedge against risk or bet the farm when it comes to almost any kind of asset. The stock market, copper, cattle. You name it.

But not your house, or home prices in general. That's about to change.

Futures and option contracts based on residential real estate indexes created by Wellesley economist Chip Case and Yale's Robert Shiller are expected to begin trading within weeks on the Chicago Mercantile Exchange. They will follow single-market indexes that track real estate prices in 10 regions, including Greater Boston. Another index aggregates the local measures for a bigger picture of US real estate prices.


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