Disclosure Policies for the Issuer Estimated Value — Facts and Fiction

30 Pages Posted: 29 Jan 2019

See all articles by Rainer Baule

Rainer Baule

University of Hagen

Patrick Münchhalfen

University of Hagen

Christian Tallau

Muenster University of Applied Sciences

Date Written: January 15, 2019

Abstract

In 2014, the German Derivatives Association introduced the policy of disclosing an Issuer Estimated Value (IEV) for structured retail investment products. The IEV is supposed to reflect the fair value of the product. As an act of self-regulation, issuers intended this measure to meet criticism regarding their intransparent profit margins. We analyze the objectivity of the IEV for a large sample of discount certificates on the German major stock market index DAX. We find that margins based on issuerdisclosed IEVs are substantially lower than fair value margins. While deviations might be explained to some degree by a lack of precision in the definition of the IEV, most issuers seem to ignore their own bankruptcy risk in their IEV estimations.

Keywords: Regulatory disclosure, Bank margins, Cost transparency, Discount Certificates, Retail Banking

JEL Classification: G11, G21, G28

Suggested Citation

Baule, Rainer and Münchhalfen, Patrick and Tallau, Christian, Disclosure Policies for the Issuer Estimated Value — Facts and Fiction (January 15, 2019). Available at SSRN: https://ssrn.com/abstract=3317499 or http://dx.doi.org/10.2139/ssrn.3317499

Rainer Baule

University of Hagen ( email )

Universitaetsstrasse 41
Hagen, 58097
Germany

Patrick Münchhalfen (Contact Author)

University of Hagen ( email )

Universitätsstrasse 41
Hagen, 58084
Germany
+49 2331 987 2952 (Phone)

Christian Tallau

Muenster University of Applied Sciences ( email )

Hüfferstraße 27
Münster, Münster 48149
Germany

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