Registered: May 2012
05-18-12 08:25 PM
Quoting from the Wall Street Journal:
Q: Hello! To what degree are possible exit scenarios priced in? Prior to the repeat elections on 17 June, what would be the key events to watch, from the equity and debt valuation perspectives?
Not very much. We¢re seeing big flights from equity markets in Spain and Italy right now, and the euro is down a few pennies against the dollar, but a euro exit is a big, big tail risk. If it happens, there will almost certainly be more consequences. The reason we aren¢t seeing them fully now is that it remains a tail risk. It is not inevitable, not in the short term at least.
- Charles Forelle
It¢s very hard also to know what to price in. It¢s not at all clear what sort of contagion would follow a Greek exit–collapses in asset markets in other euro-zone countries, runs on banks etc. etc.. In other words, you¢re in the realm of (Knightian) uncertainty rather than in the realm of risk. (To risk you can assign a probability)
- Stephen Fidler ............"