The category that a PRIIP belongs to is used to help determine the MRM class. Below is a summary of the approach to be taken for each category.
For details on the VEV calculation, click here.
CATEGORY 1 PRIIPS
A MRM of 7 shall be assigned
A MRM of 6 shall be assigned to category 1 PRIIPS which are priced on a less regular basis than monthly, or which do not have an appropriate benchmark or proxy, or whose appropriate benchmark or proxy is priced on a less regular basis than monthly.
CATEGORY 2 PRIIPS
A MRM will be assigned depending on the VaR-equivalent volatility (VEV):
• MRM 1 – VEV <0.5%
• MRM 2 – VEV 0.5% – 5%
• MRM 3 – VEV 5% – 12%
• MRM 4 – VEV 12% – 20%
• MRM 5 – VEV 20% – 30%
• MRM 6 – VEV 30% – 80%
• MRM 7 – VEV 80%+Where a category 2 PRIIPs has only monthly price data, the MRM class assigned above is increased by one additional class
CATEGORY 3 PRIIPS
A MRM will be assigned depending on the VEV, as detailed above
Where a category 3 PRIIPs has only monthly price data, the MRM class assigned above is increased by one additional class
CATEGORY 4 PRIIPS
Where the PRIIP performance depends on a factor or factors unobserved in the market or to some extent under the control of the PRIIP manufacturer, or this is the case for a component of the PRIIP, the PRIIP manufacturer shall follow the method detailed in the regulation to account for this factor or factors.
The VEV of each component of the PRIIP shall be weighted proportionally in order to arrive at an overall VEV of the PRIIP. When weighing the components, product features shall be taken into account. Where relevant, product algorithms mitigating the market risk as well as specificities of the with-profit component shall be considered.
A MRM will then be assigned based on the VEV, as detailed above.