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

Karl Case, Robert Shiller and Allan N. Weiss

No 5078, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G21 (search for similar items in EconPapers)
Date: 1995-04
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Journal of Housing Research, vol. 7, no. 2: 243-258 (1996).

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Working Paper: Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate (1995)
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