Liquid real estate Issue 05
Property price collapse highlights value of derivatives market
Against a backdrop of the most savage falls in UK commercial real estate values ever recorded – IPD’s UK index fell 3.6% in November and 3.7% in December – the real estate derivatives market has not been found wanting.
With volumes reaching record levels despite unprecedented widening in spreads, the end of 2007 and beginning of 2008 might eventually be the period when the market came of age.Volumes traded in 2007 reached £7.21 billion compared with £3.88 billion in 2006 and there is now £9 billion in notional trades outstanding. Trades in the fourth quarter of 2007 reached £1.662 billion – with 214 contracts being traded, the highest number ever – compared with £1.66 billion in the third quarter, £970 million in the second quarter and £2.72 billion in the first quarter. ...
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