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Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate

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Author Info
Karl E. Case
Robert J. Shiller
Allan N. Weiss

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Abstract

Evidence 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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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5078.

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Date of creation: Apr 1995
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Handle: RePEc:nbr:nberwo:5078

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

References listed on IDEAS
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.:

  1. Robert J. Shiller & Allan N. Weiss, 1994. "Home Equity Insurance," Cowles Foundation Discussion Papers 1074, Cowles Foundation, Yale University. [Downloadable!]
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  2. Karl E. Case & Robert J. Shiller, 1989. "The Efficiency of the Market for Single-Family Homes," NBER Working Papers 2506, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Johnston, Elizabeth Tashjian & McConnell, John J, 1989. "Requiem for a Market: An Analysis of the Rise and Fall of a Financial Futures Contract," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 2(1), pages 1-23. [Downloadable!] (restricted)
  4. Karl E. Case & Robert J. Shiller & Allan N. Weiss, 1991. "Index-Based Futures and Options Markets in Real Estate," Cowles Foundation Discussion Papers 1006, Cowles Foundation, Yale University. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Catarina Figueira & John Glen & Joseph Nellis, 2005. "A Dynamic Analysis of Mortgage Arrears in the UK Housing Market," Urban/Regional 0509006, EconWPA. [Downloadable!]
  2. Robert Buckley & Gulmira Karaguishiyeva & Robert Order & Laura Vecvagare, 2006. "Mortgage credit risk in EU countries: Constraints on exploiting the single currency market," European Journal of Law and Economics, Springer, vol. 21(1), pages 13-27, January. [Downloadable!] (restricted)
  3. Buckley, Robert & Karaguishiyeva, Gulmira & Van Order, Robert & Vecvagare, Laura, 2003. "Comparing mortgage credit risk policies : an options-based approach," Policy Research Working Paper Series 3047, The World Bank. [Downloadable!]
  4. Koetter, Michael & Poghosyan, Tigran, 2008. "Real estate markets and bank distress," Discussion Paper Series 2: Banking and Financial Studies 2008,18, Deutsche Bundesbank, Research Centre. [Downloadable!]
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