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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Risk Classification for Structured Products for the Investor |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Number of Pages | 83 |
| Date | 2016 |
| Abstract Text | Abstract In a series of interviews, this master thesis investigates different risk classification approaches of structured products applied in several European countries and provides an analysis of potential shortcomings. Particularly, the focus is put on the countries Germany, Switzerland and the UK. However, the existing directive for Undertakings for Collective Investment in Transferable Securities (UCITS) and the currently discussed regulatory framework for Packaged Retail Investments and Insurance-based Products (PRIIPs) are also examined in order to provide a broad comparison. The results hint to the Value at Risk representing the most appropriate risk figure. It should be calculated by using the historical simulation with a 99% confidence interval, a holding period of 10 days, daily returns and an observation period of five years to properly account for the market risk and to ensure comprehensibility and comparability of different structured products. Moreover, the results reveal that an optimal risk classification methodology should incorporate seven risk classes with flexible boundaries. It should not only disclose the market risk but also the credit and liquidity risk, whereby for the two latter a qualitative risk rating seems most appropriate. The research raises awareness of enhancing the transparency with regard to the risk disclosure of structured products in order to effectively manage risk and to help investors with their investment decisions |
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