Home Equity Insurance
AbstractHome equity insurance policies--policies insuring homeowners against declines in the prices of their homes--would bear some resemblance both to ordinary insurance and to financial hedging vehicles. A menu of choices for the design of such policies is presented here, and conceptual issues are discussed. Choices include pass-through futures and options, in which the insurance company in effect serves as a retailer to homeowners of short positions in real estate futures markets or of put options on real estate indices. Another choice is a life-event-triggered insurance policy, in which the homeowner pays regular fixed insurance premia and is entitled to a claim if both a sufficient decline in the real estate price index and a specified life event (such as a move beyond a certain geographical distance) occur. Pricing of the premia to cover loss experience is derived, and tables of break-even policy premia are shown, based on estimated models of Los Angeles housing prices from 1971 to 1994. Copyright 1999 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Journal of Real Estate Finance & Economics.
Volume (Year): 19 (1999)
Issue (Month): 1 (July)
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Web page: http://www.springerlink.com/link.asp?id=102945
Other versions of this item:
- Robert J. Shiller & Allan N. Weiss, 1994. "Home Equity Insurance," Cowles Foundation Discussion Papers 1074, Cowles Foundation for Research in Economics, Yale University.
- Robert J. Shiller & Allan N. Weiss, 1994. "Home Equity Insurance," NBER Working Papers 4830, National Bureau of Economic Research, Inc.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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