Martin Lee @ Sg

PRU 3Plus Pricing Error

As an example of how difficult it is to value complex structured products under current market conditions, we can look at one particular incident.

Prudential recently announced that they made a mistake for the September pricing of their PRU 3Plus fund. This is a fund with credit exposure to 80-200 reference entities via derivative transactions.

In the quarterly statement sent out to investors, the pricing was incorrectly stated as $0.896. Prudential has since clarified that the correct pricing should be $0.548 instead. This is almost a 40% difference.