PRIIPs Amendment: The Stress Scenario

Based on the EU commissions proposed amendment, this is how the PRIIPs STRESS SCENARIO might look like in a KID:

2016-12-08_09-32-21

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.

 

Management

alex
Aleksandar Puskas, Managing Partner
Born in Serbia. He has over 20 years’ experience in software development and is credited for creating the world’s first mobile app ad scraper for social media.
franco
Franco Arda, Managing Partner
Born in Switzerland. After taking his MBA, he ran structured product sales teams for Deutsche Bank in London, Zurich and Hong Kong. Afterwards, he co-founded a software company in Silicon Valley.

 

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