Data Management

Property Derivatives For Managing European Real-Estate Risk

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Executive Summary

Although property markets represent a large proportion of total wealth in developed countries, the real-estate derivatives markets are still lagging behind in volume of trading and liquidity. Over the last few years there has been increased activity in developing derivative instruments that can be utilized by asset managers. In this paper, the authors discuss the problems encountered when using property derivatives for managing European real-estate risk. They also consider a special class of structured interest rate swaps that have embedded real-estate risk and propose a more efficient way to tailor these swaps.

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