Annex II Methodology for the presentation of risk
Part 1 Market risk assessment
Determination of the market risk measure (MRM)
1. Market risk is measured by the annualised volatility corresponding to the value-at-risk (VaR) at a confidence level of 97,5 % over the recommended holding period, unless stated otherwise. The VaR is the percentage of the amount invested, that is returned to the retail investor.
2. The PRIIP shall be assigned a MRM class in accordance with the following table:
|
MRM class |
VaR-equivalent volatility (VEV) |
|
1 |
< 0,5 % |
|
2 |
≥ 0,5 % and < 5,0 % |
|
3 |
≥ 5,0 % and < 12 % |
|
4 |
≥ 12 % and < 20 % |
|
5 |
≥ 20 % and < 30 % |
|
6 |
≥ 30 % and < 80 % |
|
7 |
≥ 80 % |
Specification of PRIIP categories for the purposes of the market risk assessment
3. For the purposes of determining market risk, PRIIPs are divided into four categories.
4. Category 1 covers the following:
(a) PRIIPs where investors could lose more than the amount they invested;