due to current interest in the topic, I am running this post again.
Derivatives Based on Real Property Loans
I like to begin by defining terms. I found the following definition in an online dictionary:
” an arrangement or instrument(such as a future, option, or warrant) whose value derives from and is dependent on the value of an underlying asset”. It is important to note that the value is not in the underlying asset or mortgage but is merely derived from the underlying mortgage – more on that later in this post.
When applied to real estate loans secured by mortgages a definition would be A Financial Contract whose value is dependent on the value of the underlying mortgage loan.
Seems simple enough, so how did derivates help create the current economic…
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