Probability Performance Scenarios Are Better: An Efficient Disclosure of Higher Moments Information From No-Arbitrage Market Implied Distributions
31 Pages Posted: 27 Nov 2020
Date Written: October 2, 2020
The present work proposes a methodology for the representation of performance scenario in Packaged Retail and Insurance-based Investment Products (PRIIPS), by the means of a no-arbitrage probability table easy to understand for the retail investor. A statistical reconstruction via the method of moments allows to capture the main properties of the PRIIP market implied distribution by identifying the minimum number of descriptive moments needed. A reasonable quantile partition that is effective for representing to the retail investor the complex distributions of structured products characterized by non-linear pay-offs is then proposed.
JEL Classification: C02, C32, C51, C61, G11, G17, G20, G32, G38, K23
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