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Managing Financial RisksFrom Global to Local$
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Gordon L. Clark, Adam D. Dixon, and Ashby H. B. Monk

Print publication date: 2009

Print ISBN-13: 9780199557431

Published to Oxford Scholarship Online: September 2009

DOI: 10.1093/acprof:oso/9780199557431.001.0001

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Managing Financial Risks: the Strange Case of Housing

Managing Financial Risks: the Strange Case of Housing

(p.233) 10 Managing Financial Risks: the Strange Case of Housing
Managing Financial Risks

Susan J. Smith

Oxford University Press

In the ‘home ownership’ societies of the English speaking world — where owner occupation is the tenure de rigueur, and mortgages are the respectable face of debt — borrowers, lenders, developers, and politicians are vying for the positions that gain most, and lose least, from the housing roller coaster, as it navigates a landscape of economic and environmental shocks. This jostling is hardly surprising, because housing is the world's largest class of assets, and its price appreciation has outstripped that of most other investments for more than a decade. But buying into housing can be a risky business, especially for ordinary households whose wealth tends to be concentrated within a single owned home where it increasingly forms an asset base for welfare. Strangely none of the financial instruments invented to manage this growing dependence on a narrow, sometimes volatile, and generally heavily leveraged, investment ‘portfolio’ — and which protect large institutions against the ups and downs of virtually every other major asset class (commodities, equities, bonds, and more) — are yet available for housing. Attempts to change this are, however, underway. This chapter weighs up their merits and limitations, considers whether they are likely to succeed, and comments on who gets what, where as a result.

Keywords:   global finance, risk management, housing market, home ownership, mortgages

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