I have been recently reading about how derivative instruments (options, forwards, future contracts) are used to protect your securities. I started wondering if its similarly possible to hedge your personal assets (especially home through option contract), where another party would be willing to buy your mortgage at a fixed price on some future date. Do such corporations exist?

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    Shares are fungible: they're all the same. A mortgage is rather unique. Also, while mortgages are commonly sold, it is the bank who sells them. Your loan is their asset. You can't sell their assets. So it appears that there are some conceptual problems with your idea. Your asset is your house, and even if there was a third party willing to but it in the future you couldn't do so without permission from the mortgage owener (bank) – MSalters Aug 12 '15 at 12:48
  • Thank you. Yes I was wondering about selling the house. In an option contract, you only get the right (& NOT obligation) to sell, which should still be possible. – WanderingMind Aug 12 '15 at 12:51
  • Good luck finding someone who is willing to promise to buy your house at a pre-specified price and on demand ... or are you promising to vacate upon demand? – keshlam Aug 12 '15 at 13:06
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    Such option contracts necessarily have two sides. If one party has the right to sell, then the other has an obligation to buy. (And vice versa, a right to buy implies an obligation to sell). I probably misunderstood your intent. In many juridictions, you already have that effective right without needing a third party. You just walk away from your home & mortgage, and that effectively sells the home to the mortgage owner for the loan value. – MSalters Aug 12 '15 at 13:06
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    @keshlam: It's more likely than you'd think. A reverse mortgage doesn't even have a promise to vacate. The counterparty in a reverse mortgage may have to wait for 30 years or more. But a reverse mortgage only has two parties involved, while the case here has 3 (home owner, mortgage owner, future buyer). That would still be simple if the future buyer was known at the time of mortgage closing - the lender could verify that the offer to buy exceeds the assessed home value. But why would a future buyer offer such a premium? – MSalters Aug 12 '15 at 13:19

No. Such companies don't exist. Derivative instruments have evolved over a period and there is a market place, stock exchange with members / broker with obligations etc clearly laid out and enforceable.

If I understand correctly say the house is at 300 K. You would like a option to sell it to someone for 300 K after 6 months. Lets say you are ready to pay a premium of 10K for this option. After 6 months, if the market price is 400 K you would not exercise the option and if the market price of your house is 200 K you would exercise the option and ask the option writer to buy your house for 300 K.

There are quite a few challenges, i.e. who will moderate this transaction. How do we arrive that house is valued at 300K. There could be actions taken by you to damage the property and hence its reduction in value, etc.

i.e. A stock exchange like market place for house is not there and it may or may not develop in future.

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