Tuesday, April 25, 2006

Housing Futures

More good news from the world of financial innovation!

Thanks to MoneyScience for pointing out the following from Robert Shiller:

The Korea Herald : The Nation's No.1 English Newspaper:
"Within a month, the Chicago Mercantile Exchange (CME), in collaboration with [other companies]... will launch futures and options contracts on home prices in ten cities in the United States. The contracts will be settled on the S&P/Case-Shiller Home Price Indices,.... For many years we have been campaigning for housing futures, but no exchange wanted to use such indices to create a futures market until now."

"....A fundamental principle of financial theory, "diversification" or "risk spreading,

"....People and businesses in New York, for example, are overexposed to their local real estate risks, so they should reduce this risk by selling New York home price futures."

I really hope this catches on! It could be a great step in reducing the exposure on what to many is their largest asset.

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