This paper extends Bjork and Clapham (Journal of Housing Economics 11:418–432, 2002) model for pricing real estate index total return swaps. Our extension considers counterparty default risk within a first passage contingent claims model. We price total return swaps on property indices with different levels of default risk. We develop this model under same assumptions as Bjork and Clapham (Journal of Housing Economics 11:418–432, 2002) and find that total return swap price is no longer zero. Total return swap payer must charge a spread over the market interest rate that compensates him for the exposure to this additional risk. Based on commercial property indices in the UK, we observe that computed spreads are much lower than a sample of quotes obtained from one of the traders in the market.
The Journal of Real Estate Finance and Economics – Springer Journals
Published: Sep 1, 2007
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera