Title

The New Real Estate Futures Contracts; Do They Provide a Cost-Effective Method to hedge Against the Risk of A Decline in the Value of Residential Real Estate Holdings?

Abstract

A major concern for investors in residential real estate throughout the United States is the decline in value of residential real estate. The high demand for residential real estate bas increased prices significantly. Many analysts believe that the recent price increases have been fueled by speculation and there is currently potential for a decline in prices. This thesis studies various methods by which investors might potentially hedge the decline in residential real estate values that many analysts predict will occur. Three possible methods that could provide investors with a cost-effective way to hedge a decline in residential real estate values are studied in this thesis. These methods are taking a short position in a portfolio of stocks from the PHLX Housing Index, buying Morgan Stanley I 00% Bear Capital Protected Notes, and selling a Hedgelet portfolio, which consists of binary options offered by Hedgestreet. Throughout the analysis of the hedging strategies, the objective was to determine which hedging strategy would provide the best possible hedge at the lowest possible cost to the investor. I concluded that none of the three hedging strategies would provide a cost-effective hedge for the investor.

Notes

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Thesis Completion

2006

Semester

Spring

Advisor

Schnitzlein, Charles R.

Degree

Bachelor of Science (B.S.)

College

College of Business Administration

Degree Program

Finance

Subjects

Business Administration -- Dissertations, Academic; Dissertations, Academic -- Business Administration

Format

Print

Identifier

DP0022080

Language

English

Access Status

Open Access

Length of Campus-only Access

None

Document Type

Honors in the Major Thesis

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