Replicating EIOPA’s Equity Index with the Correct DAX Price Series
Summary
The document describes an attempt to reproduce the equity index used for Solvency II’s symmetric adjustment to the equity capital charge. The index combines eleven national equity indices using specified weights and normalized price-index values. The author reports that their calculation initially tracks the regulator’s published figures, then drifts increasingly over time, and wonders whether dividends explain the difference.
The answer identifies a data-series issue: the DAX price index ticker should be used, rather than the series the questioner had selected. This points to index definition and data selection as likely sources of replication error. The exchange does not provide a full implementation or demonstrate the correction across the whole history, so it offers a specific diagnostic rather than a complete replication procedure.
Key ideas
- The Solvency II symmetric adjustment uses a composite equity index built from weighted, normalized price indices.
- The author reports growing divergence despite an initially close match to the regulator’s published values.
- The answer points to the DAX price index series as the appropriate input.
- Checking the precise index variant can help diagnose replication errors.
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# Replicating the EIOPA equity index for the symmetric adjustment of the equity capital charge in Solvency 2 # Replicating the EIOPA equity index for the symmetric adjustment of the equity capital charge in Solvency 2 My question is rather specific but I'm wondering if someone might be able to help. In the Solvency 2 framework, the equity capital charge requires to compute a symmetric adjustment which is itself computed as the difference between the current value of an equity index and its average over the last 36 months (1). These values are published on the regulator's website (2) every month but I have to replicate it. The equity index mentioned above is a composite of 11 indices with the following weights, applied on normalized values of the price indices: - AEX Index -> 14% - CAC Index -> 14% - DAX Index -> 14% - ASX Index (FTSE All-Shares) -> 14% - FTSEMIB Index -> 8% - IBEX Index -> 8% - NKY Index (Nikkei) -> 2% - OMX Index -> 8% - SPX Index -> 8% - SMI Index -> 2% - WIG30 Index -> 8% If I follow all the steps outlined in the EIOPA document published monthly (picture below), I get an almost perfect match for the first few dates after the date used for normalization and then my calculation and the one published start to diverge more and more (as shown in the picture below). My guess is that there might be dividends coming in play and that might be the reason of this growing discrepancy. However I am not sure how to correct this. I download data from Bloomberg (field PX_LAST) and the EIOPA documentation states that price indices should be used (not total return indices). Thanks ! ## Answer by p.vitzliputzli (score 0) https://quant.stackexchange.com/a/58312 > I download data from Bloomberg (field PX_LAST) and the EIOPA documentation states that price indices should be used (not total return indices). DAXK Index is the correct ticker in order to get the price index.
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