This may come in handy for all you homeowners.... http://www.planetrealtor.com/florida/news/daily/news.cfm?article=n3-11102005
how on earth will a market maker hedge a position? i really don't see how this can work at all. a good idea, but...
"how on earth will a market maker hedge a position? There are related products, but I agree that it would be hard for "delta-neutral" market maker to operate in this product. But I don't think there has to be a market maker at all.
Here's a basic link I found: http://www.cme.com/files/CmeCsiHousingIntroTermSheet.pdf Have to admit I am curious about this stuff. Maybe sell some March 2009 calls on my house.
How does a MM in the grains hedge his position? Usually the speculators do not. The hedging will be the land banks and homebuilers. The locals will take on the risk. The options MM will hedge with the futures product. G