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April 1976

A Mortgage Futures Market: Its Development, Uses, Benefits, and Costs

by Neil A. Stevens

An inherent risk associated with dealings in commodities is the possibility of financial losses resulting from unexpected changes in the price of the commodity. One mechanism for reducing such risks is a futures market. Last fall a futures market in mortgages began operations on the Chicago Board of Trade. In view of the volatility of mortgage interest rates in recent years, this new futures market will likely be useful to some mortgage market participants in reducing their risks from unexpected interest rate movements.