Risk-rating structured products is a complex task

The UKSPA’s new risk ratings methodology for structured products marks a stride forward for the industry – but why separate market risk from credit risk?

Tim Mortimer, Future Value Consultants

In recent months, the debate over how best to convey the relative riskiness of structured products to retail investors has reached fever pitch. Played out at both a UK and an EU-wide level between European watchdogs and parties such as the UK Structured Products Association (UKSPA), there is as yet little sign of consensus.

In November, the three European Supervisory Authorities (ESAs) jointly issued a discussion paper that included a section on how risk ratings could be calculated and conveyed

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