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Home equity insurance, house price insurance
Home equity insurance or house price insurance protects home-owners against a decline in house prices. Housing Finance Review: Analysis and Proposals (HM Treasury, March 2008) referred to this idea.In 1996 I wrote a paper about this idea, discussing a new type of futures contract - a 'perpetual future' - which could be useful for hedging and pricing the proposed retail products.
- Indemnities for
long term price risk in the UK housing market
ABSTRACT: Discusses the features which distinguish the market for residential property from the markets for other assets. Proposes that financial institutions should offer house buyers indemnity policies which pay out an amount related to any fall in the level of a general index of house prices, on the sale of the house at a loss at any time during the mortgage term. To facilitate hedging the risk of a portfolio of such policies (and therefore, the pricing of the policies), a market in 'perpetual futures' on indices of housing assets is proposed. Discuss possible users of these contracts, and outlines further research. pdf (17pp, 135kB)
In May 2006, the Chicago Mercantile Exchange commenced trading in CME housing futures and options.