recently new document has been provided by EU supervisors regarding the new PRIIPs KID methodology. (PRIIPs KID is 3page document about the fund/product that is being sold to clients. It has to inform about scenarios and risk of the investment)
This new document include examples of calculation and my question is regarding the stress performance scenario for category 2 PRIIPs, which is on page 23 and 24.
I tried to reconstruct this example and was successful with all other scenarios except the stressed. That means that I should have same dataset as they have. However my results for stressed scenario are slightly shifted. Moreover the stressed volatilities (red bold on page 24) are different for 3 and 5 holding period, which does not correspond to the methodology on page 23. The formula for stressed volatility is based on historical data only and should NOT depend on the holding period, aside from 1 year period which is special.
So my question is:
- Why are the stressed volatilities for 3 and 5 holding period different?
- Is anyone able to reconstruct their numbers precisely?
If code or excel is needed I can share, however I do not know how to share datasets here.
Requested info about the dataset.
- Source: Bloomberg
- Start date: 01.05.2012
- End date: 28.04.2017
- Remove two NAs
After there should be 1280 observed returns (1281 prices). For favourable, unfavourable and neutral scenario I get 1e-10 (rounding) error.
EDIT 3Y and 5Y stress volatilities should be equall, as I found out in slide 26 of presentation from the latest ESA's workshop 27.11.2017 in frankfurt. Which means full dataset should be used for rolling volatilities.