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The real estate derivatives market allows participants to manage risk and return from exposure to property, without buying or selling directly the underlying asset. Such a market is growing very fast hence the need to rely on simple yet effective pricing models is very great. In order to take into account the real estate market sensitivity to the interest rate term structure in this paper is presented a two-factor model where the real estate asset value and the spot rate dynamics are jointly modeled. The pricing problem for both European and American options is then analyzed and since no closed-form solution can be found a bidimensional binomial lattice framework is adopted. The model proposed is able to fit the interest rate and volatility term structures

In this paper the dynamic portfolio selection problem is studied for the first time in a dual utility theory framework. The Wang transform is used as distortion function and well diversified optimal portfolios result both with and without short sales allowed.