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A pricing framework for real-estate derivatives
journal contribution
posted on 2023-06-09, 20:22 authored by Frank J Fabozzi, Robert J Shiller, Radu TunaruRadu TunaruNew methods are developed here for pricing the main real estate derivatives — futures and forward contracts, total return swaps, and options. Accounting for the incompleteness of this market, a suitable modelling framework is outlined that can produce exact formulae, assuming that the market price of risk is known. This framework can accommodate econometric properties of real estate indices such as predictability due to autocorrelations. The term structure of the market price of risk is calibrated from futures market prices on the Investment Property Databank index. The evolution of the market price of risk associated with all five futures curves during 2009 is discussed.
History
Publication status
- Published
Journal
European Financial ManagementISSN
1354-7798Publisher
WileyExternal DOI
Issue
5Volume
18Page range
762-789Department affiliated with
- Accounting and Finance Publications
Research groups affiliated with
- Quantitative International Finance Network Publications
Full text available
- No
Peer reviewed?
- Yes