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Precursor for Real Estate Futures, Options and Derivatives? (Wednesday, November 21, 2007)

This 1990 published work predates others for a novel approach and vision for real estate futures, options and other derivatives that are cash settled and indexed among other things. Also, the reference book presents a securitization process for HOMER™, a new security and asset class.

“The attractiveness of the source of this security is that it would reduce the funding commitments for the depository or other beneficial owner and allow for the creation of a homogenized security that could be shorted (unlike real estate, which is prohibited from being sold short). The attractiveness of using this security is that it would enable an investor to participate in equity real estate values without any further obligation such as maintenance, taxes, rental, and other operational concerns. These underlying securities could form the basis for forwards, futures, and options markets that could be short-salable for hedging purposes. The securities would directly refer to the equity collateral value for a mortgaged property. The mechanics would approximate the cash settlement and indexation of the municipal bond futures contract or similar instruments.”

Quoted by permission:

  • HEDGING: Principles, Practices, & Strategies for the Financial Markets”, 1990.

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