Home Equity Insurance
Home equity insurance policies, policies insuring homeowners against declines in the price 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. 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 there is a sufficient decline in the real estate price index and a specified life event (such as a move beyond a certain geographical distance) occurs. 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 1971- 91.
|Date of creation:||Aug 1994|
|Date of revision:|
|Publication status:||published as The Journal of Real Estate Finance and Economics, Vol. 19, no. 1 (July 1999): pp. 21-47.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Takatoshi Ito & Keiko Nosse Hirono, 1993.
"Efficiency of the Tokyo Housing Market,"
NBER Working Papers
4382, National Bureau of Economic Research, Inc.
- Karl E. Case & Robert J. Shiller, 1988.
"The Efficiency of the Market for Single-Family Homes,"
NBER Working Papers
2506, National Bureau of Economic Research, Inc.
- Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-37, March.
- McDonald, Robert & Siegel, Daniel, 1984. " Option Pricing When the Underlying Asset Earns a Below-Equilibrium Rate of Return: A Note," Journal of Finance, American Finance Association, vol. 39(1), pages 261-65, March.
- 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 for Research in Economics, Yale University.
- O'Brien, Thomas J & Selby, Michael J P, 1986. "Option Pricing Theory and Asset Expectations: A Review and Discussion in Tribute to James Boness," The Financial Review, Eastern Finance Association, vol. 21(4), pages 399-418, November.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Constantinides, George M, 1978. "Market Risk Adjustment in Project Valuation," Journal of Finance, American Finance Association, vol. 33(2), pages 603-16, May.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4830. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.