Course Overview

Designed for real estate professionals who have no background in derivatives, this course will provide a basic introduction to this exciting new way to invest in, or hedge, real estate: real estate index futures. Based on indexes of price movements in the private (direct) property market, such derivatives could revolutionize the real estate investment industry, increasing efficiency by reducing transaction and management costs, promoting specialization, and allowing hedging or “market value insurance”. The course will introduce the nature and mechanics of real estate equity index return forwards and swaps, and present the fundamentals of correct pricing of these derivatives. The course will include “hands-on” derivatives trading exercises and cases, useful Excel templates, and guest speakers from the real estate and derivatives industry. Topics to be covered during the two-day course include:

 Topics

• What are derivatives (forwards & swaps)

• How to use them (derivatives positions)

• Derivatives pricing basics

• Derivatives trading game exercise

• Practice case (use & pricing)

Learning Objectives and Outcomes

• Identify a new way to invest or hedge in real estate.

• Describe the nature and mechanics of index forwards and swaps.

• Explain the fundamentals of correct pricing of index derivatives.

• Gain hands-on feeling for trading and useful Excel templates.

Instructor Bio

David Geltner is the Director of the MIT Center for Real Estate, as well as the George Macomber Professor and Professor of Real Estate Finance in the Department of Urban Studies & Planning (DUSP).  As the Center’s Director, Dr. Geltner shares responsibility for the overall planning and management of the Center and heads MIT’s Master of Science in Real Estate Development (MSRED) program.