Wednesday, August 8, 2007

RPX - Residential Property Index

If the residential market hasn't seen it's share of inflated values from the flow of easy money lately, now investors can trade in the RPX ("Residential Property Index"). The RPX will enable users to trade residential property prices in 25 MSA's nationwide in addition to a composite index based on those 25 cities. The trades are based upon an initiation of trading in derivative instruments and financial products based on the RPX from Radar Logic.

Radar Logic uses a proprietary modeling technique to create Daily Prices derived from the actual prices paid for US Residential real estate, which the Federal Reserve reports in total aggregated value of assets held to be $22.9 trillion as of 3/31/07.

I wonder if the lenders will short their positions on the RPX in order to hedge their bets against the underlying foreclosures that will result as ARM's readjust. This tactic is used by managers of oil & gas assets to limit their downside on future price fluctuations, and now the largest lenders in the country could short RPX positions, knowing that they have an influx of NOD's potentially coming in 4Q '07. Perhaps the Kramer meltdown video gave Wall Street an idea on how to feed off itself.

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