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

Abstract

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

Suggested Citation

Minenna, Marcello, Probability Performance Scenarios Are Better: An Efficient Disclosure of Higher Moments Information From No-Arbitrage Market Implied Distributions (October 2, 2020). Available at SSRN: https://ssrn.com/abstract=3709849 or http://dx.doi.org/10.2139/ssrn.3709849

Marcello Minenna (Contact Author)

Customs and Monopolies Agency ( email )

Piazza Mastai, 12
Rome, 00153
Italy

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