Porteføljeoptimering ved inkludering af ejendomsderivater under den finansielle krise

Tina Lærke Sørensen

Student thesis: Master thesis


The purpose of this thesis was to establish the potential gains of a Danish property derivative market for the professional investors as well as for the underlying real estate market. The structure of the thesis is first to establish the unique characteristics of the Danish commercial real estate market, hence to give an insightful understanding of the price mechanisms and investment barriers. Second, the thesis seeks to establish the direct and indirect incentives behind the property derivatives. Also how a derivate market is structured and how this conflicts with the commercial real estate markets. A close review of the IPD appraisal based index, the smoothing-effect in this type of index and the arising issues for the portfolio optimization. Two scenarios of available asset markets were construed. One scenario included the stock market, a real estate stock index, treasury bonds, regular bonds, and a property portfolio. The other scenario also included a property index. The total returns are derived for the period 1997-2010 and tangent portfolios, and sharpe ratios were calculated by Markowitz’s mean-variance approach. The findings in this thesis were, that the gain to a large institutional property investor, represented by Danicas Property portfolio, was closed to none, with an increase of the sharpe ratio of only 0,414 pct when a property index was included in the portfolio optimization. However, due to severe limitations in available data the findings must be applied with definite cautions. Also taxation issues or capital requirements of the investor or the derivate contract is not considered. With these reservations in mind, it is concluded that given the lack of financial incentives to financially strong property investors, it is very unlikely that a Danish property derivate market would ever reach the required liquidity. Since liquidity in a market depends on the investor confidence it is critical that derivate markets are able to tolerate a collapse in the underlying markets. In this regard, the risk of contamination in the global derivative markets is reviewed. It was concluded that the immature property derivative markets did not cope very well since the financial collapse of 2007 affected the derivate markets.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2011
Number of pages87