Risk-hedging in real estate markets

Abstract

Topics in real estate markets have attracted much attention recently. In this article, we first address the risk-hedging issues of speculators based on an American put option pricing model, and then investigate their risk-hedging behaviors using a generalized swing option so as to take capacity effects into account. Semi-analytic solutions are derived, and examples are presented. Results have important implications in the real estate markets and contribute to the operational research literature on risk measuring and risk management.