Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate
AbstractEvidence is shown, using US foreclosure data by state 1975-93, that periods of high default rates on home mortgages strongly tend to follow real estate price declines or interruptions in real estate price increase. The relation between price decline and foreclosure rates is modelled using a distributed lag. Using this model, holders of residential mortgage portfolios could hedge some of the risk of default by taking positions in futures or options markets for residential real estate prices, were such markets to be established.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1098.
Length: 21 pages
Date of creation: May 1995
Date of revision:
Publication status: Published in Journal of Housing Research (1996), 7(2): 243-258
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
- Karl E. Case & Robert J. Shiller & Allan N. Weiss, 1995. "Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate," NBER Working Papers 5078, National Bureau of Economic Research, Inc.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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