[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-324802-105":59,"doc-detail-324802-en":131},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":124,"head_meta":126,"extra_data":128,"updated_unix":130},105,"en","home-price-derivatives","Home Price Derivatives","","Home Price Derivatives explains how residential real estate price movements create amplified risks for leveraged U.S. homeowners and why limited protection against downturn volatility existed until new housing derivatives were introduced. It describes CME trading of futures and options linked to the Case-Shiller Home Price Indices, detailing how the indices are constructed from repeat sales, including a step-by-step example. The article also addresses data quality challenges in inferring market-wide price changes from limited observed transactions.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/home-price-derivatives/324802/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/home-price-derivatives/324802.png","ImageObject",300,407,{"name":92,"@type":93},"Skyler","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-11-08","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",11,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"Why did homeowners previously have difficulty protecting against housing market downturns?","Question",{"text":113,"@type":114},"Because residential real estate holdings were highly leveraged, price declines translated into large swings in homeowners’ net worth, and homeowners had limited tools to hedge that volatility.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"What new derivatives were introduced, and what are they based on?",{"text":118,"@type":114},"On May 16, 2006, the CME began trading two new contracts: a futures contract and an option on the futures contract. Their values are based on the Case-Shiller Home Price Indices.",{"name":120,"@type":111,"acceptedAnswer":121},"How are the Case-Shiller indices constructed at the simplest level?",{"text":122,"@type":114},"They are based on changes in individual single-family home prices observed through the repeat sale of the same structures over time, using repeat-sale transactions to infer appreciation rates.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},324802,1790420370,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":145,"preview_page_count":4},2336464648746,"https://ap-avatar.wpscdn.com/davatar_276721f389ce27ea32af1340a28f341c","# Home Price Derivatives\n\nby O.Emre Ergungor  \nIhe fast-paced appreciation of homeprices in recent years made residentialreal estate the second-largest class ofassets owned by U.S.households in2006,comprising 34 percent of theirassets(by comparison,stocks comprised27 percent and bonds 39 percent thatyear),up from 24 percent in 2000.Typically,real estate holdings are alsohighly leveraged,so fluctuations inhousing prices result in much biggerfluctuations in homeowners'net worth.If home prices decline,as some predict,homeowners may have considerableexposure to the real estate market'sdownside risks,yet they can do little toprotect themselves from such volatility.  \nThis is about to change.On May 16,2006,the Chicago Mercantile Exchangebegan trading two new derivatives con-tracts,a futures contract and an optionon the futures contract,which create theability to invest in residential real estatewithout having to actually buy or sella house.The value of these two newderivatives is based on the Case-ShillerHome Price Indices,developed by KarlCase and Robert Shiller in the 1980s.There are 20 regional indices and a com-posite index that is calculated using theregional indices.The regional indicesfollow the value of home prices in 20large U.S.metropolitan areas(AtlantaBoston,Charlotte,Chicago,Cleveland,Dallas,Denver,Detroit,Las Vegas,Los Angeles,Miami,Minneapolis,NewYork,Phoenix,Portland,San Diego,San Francisco,Seattle,Tampa,andWashington,D.C.)by tracking the resalevalues of homes in each market.At thistime,derivatives contracts are availablefor only 10 of the metro areas,but theywill eventually be available for allareas.Other companies(Moody's,for  \nexample)calculate home price indicesfor other regions using the Case-Shillermethodology as well.  \nIn this Economic Commentary,I explainhow these indices are constructed andwhy they are better at tracking housingprices than some alternative measurescited in the financial media.I alsoexplain how derivatives based on theindices—and some potential productswhich financial firms might use thederivatives to create,including homeequity insurance,can protect homeown-ers against the volatility of residentialreal estate prices.  \n# ■ Case-Shiller Home PriceIndices:The Basics\n\nAt the simplest level,the Case-ShillerIndices are based on changes in individ-ual single-family home prices asobserved through the repeat sale of thesame structures over time.  \nBox 1 contains a simple example ofhow the index can be calculated forAnytown,USA.Between 2001 and2003,three single-family homes havebeen sold in Anytown.House A waspurchased in 2001 for $300,000,but itsowner put it on the market again thefollowing year and sold it for $310,000,a 3 percent gain.(All growth rates arerounded to the nearest full percentagepoint.)Since this is the only instance ofa repeat sale(that is,two observable saletransactions for the same house)in oursample from the 2001-02 period,wewill assume that all home prices rose3 percent between 2001 and 2002.Houses B and Cwere also on the marketin 2001 and were sold for $250,000and $640,000,respectively.We cannotobserve their values in 2002 directly,but  \nJanuary 15,2007  \nUntil recently,homeowners had noway to protect the value of theirhomes against losses that couldresult from housing market down-turns.With the derivatives contractsintroduced by the CME last year,homeowners now have some meansof protection,and new and betterproducts are more likely to followfrom them.  \nthe index calculation assumes that theirvalue increased 3 percent in the first yearafter the sale transaction.Both houseswere put back on the market and sold in2003,and we have direct observations oftheir resale values(S280,000 andS730,000,respectively).Given the first-year appreciation of3percent,House Bmust have appreciated 8 percent between2002 and2003 to reach its S280,000resale value.Similarly,House C musthave appreciated 10 percent during thesame period to reach its S730,000 resalevalue.We now have two estimates of the20","cbCaikuMYnit61BP","https://ap.wps.com/l/cbCaikuMYnit61BP","pdf",1171613,"English","# Home Price Derivatives\n## Case-Shiller Home Price Indices: The Basics\n## Data Quality","[{\"question\":\"Why did homeowners previously have difficulty protecting against housing market downturns?\",\"answer\":\"Because residential real estate holdings were highly leveraged, price declines translated into large swings in homeowners’ net worth, and homeowners had limited tools to hedge that volatility.\"},{\"question\":\"What new derivatives were introduced, and what are they based on?\",\"answer\":\"On May 16, 2006, the CME began trading two new contracts: a futures contract and an option on the futures contract. Their values are based on the Case-Shiller Home Price Indices.\"},{\"question\":\"How are the Case-Shiller indices constructed at the simplest level?\",\"answer\":\"They are based on changes in individual single-family home prices observed through the repeat sale of the same structures over time, using repeat-sale transactions to infer appreciation rates.\"}]","Home Price Derivatives | PDF",1789968910,13]