Abstract
Derivatives on real estate indices have the potential to increase effectively the liquidity of real estate as an asset class. A well-functioning market for real estate derivatives will help diversify investment markets since real estate derivates allow investors to change synthetically and quickly country allocations in their portfolios. If portfolio managers are able to increase or decrease their exposure in the various real estate markets they will be able to manage their risks better. The market for real estate derivatives is still in an infant stage in Germany, though. Still, derivatives on real estate indices have also in Germany the potential to contribute substantially to a more professional real estate portfolio management.
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