ESA Joint Committee · priips-34 Final

What is meant by factors not observed in the market as stated in Annex II, Part 1, Point 7?

Regulation
PRIIPs
Answered
2017-08-18
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

What is meant by factors not observed in the market as stated in Annex II, Part 1, Point 7?

Answer

Category 4 products are those where the value depends, at least in part, on factors not observed in the market. That is, the value is not calculated using market prices of underlyings but depends to some extent on decisions of the manufacturer which are not triggered automatically by external factors. In insurance, a typical example mentioned in the Delegated Regulation is with-profit insurance contracts that distribute to retail investors a portion of the manufacturer’s profits. Structured products which depend on multiple underlying securities should not be classified as Category 4 due to the impact of the correlation. These products are expected to be either Category 1 or 3 depending on the availability of data.
View original on ESA Joint Committee (EBA, ESMA, EIOPA) ↗

This Q&A is published by ESA Joint Committee (EBA, ESMA, EIOPA) and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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