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J. Risk Financial Manag. 2016, 9(2), 5; doi:10.3390/jrfm9020005

Humanizing Finance by Hedging Property Values

Polytechnic University of Catalonia, Barcelona 08014, Spain
Academic Editor: Donald Lien
Received: 13 March 2016 / Revised: 15 May 2016 / Accepted: 30 May 2016 / Published: 10 June 2016
(This article belongs to the Special Issue Financial Derivatives and Hedging)
View Full-Text   |   Download PDF [204 KB, uploaded 10 June 2016]

Abstract

The recent financial crisis triggered the greatest recession since the 1930s and had a devastating impact on households’ wealth and on their capacity to reduce their indebtedness. In the aftermath, it became clear that there is significant room for improvement in property risk management. While there has been innovation in the management of corporate finance risk, real estate has lagged behind. Now is the time to expand the range of tools available for hedging households’ risks and, thus, to advance the democratization of finance. Property equity represents the major asset in households’ portfolios in developed and undeveloped countries. The present paper analyzes a set of potential innovations in real estate risk management, such as price level-adjusted mortgages, property derivatives, and home equity value insurance. Financial institutions, households, and governments should work together to improve the performance of the financial instruments available and, thus, to help mitigate the worst impacts of economic cycles. View Full-Text
Keywords: household portfolio management; property finance; risk management; behavioral finance; financial institutions; government policies household portfolio management; property finance; risk management; behavioral finance; financial institutions; government policies
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Roig Hernando, J. Humanizing Finance by Hedging Property Values. J. Risk Financial Manag. 2016, 9, 5.

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