ESA Joint Committee · priips-46 Final

For products with an automatic early-redemption feature, the holding periods might differ for each of the simulations. What value of T, related to the formula for the calculation of the MRM, the lengt

Regulation
PRIIPs
Answered
2017-07-04
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

For products with an automatic early-redemption feature, the holding periods might differ for each of the simulations. What value of T, related to the formula for the calculation of the MRM, the length of the recommended holding period, should be chosen?

Answer

The recommended holding period should not be confused with the T (Time) to be used in the conversion of the VaR into a volatility. When performing a set of simulations, the exact holding time (T) associated with the 97.5% confidence level can be identified. That is the time to be used in the conversion instead of the recommended holding period. It can be noted that any contract with an early redemption feature will be either a Category 3 or a Category 4 product and will require simulations.
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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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