Based on the EU commissions proposed amendment, this is how the PRIIPs STRESS SCENARIO might look like in a KID:
If interested, here’s the revised European commission (only 9 pages) document.
The new stressed scenario is calibrated to a value of extreme volatility and to an extreme percentile.
The new stressed scenario is calculated using a value of stressed volatility calculated in a 21-business day long rolling intervals with a given volatility percentile (i.e. 90%) and a confidence of 5%.
In the old RTS, highly non-linear payoffs such as the popular Multi Barrier Reverse Convertible could easily be “optimized” for a low SRI. If this proposed Stress Scenario is approved, “optimizing” Multi Barrier Reverse Convertibles will be much harder in the future.