A study on real estate derivatives

All major asset classes including stocks and bonds have a well developed derivative market. Derivatives enable counterparties to reflect a view on a particular market, without having to trade the underlying asset. This seems to be a particularly appealing feature for real estate, an industry characterized by high transaction cost, long lead transaction time and lack of short-selling mechanism. Still, real estate remains the last major asset class without a liquid derivative market until recently when Credit Suisse began to offer swaps on the NCREIF Property Index (NPI) in the U.S. early this year following the UK's ten-year endeavor in developing real estate derivative market. The purpose of this thesis is two fold. First, in chapter one and two, we would like to explain what real estate derivatives are, how they work and why they can be beneficial to investors. Second, we are introducing some practical tools investors may use in evaluating and trading real estate derivatives. In chapter three, we are introducing three forecasting models on the NCREIF Property Index. In chapter four, we are expanding Prof. David Geltner's pricing methods on real estate index capital return swap to the NPI total return swap and property type total return swap.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Architecture.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2006

Authors dc:creator

• Lim, Jong Yoon, S.M. Massachusetts Institute of Technology
• Zhang, Yi

Advisor dc:contributor.advisor

• David Geltner.

• Architecture.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/37444
• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Identifier URI

http://dspace.mit.edu/handle/1721.1/37444

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/37444