Is the Risk Premium High Enough in the Russian Ruble?
FX & Rates
177 Views, 18 Jan 2022 22:15
- The Russian ruble has been the worst-performing currency in EM over the past month leading to the question: Is the currency cheap based on the risk premium priced in it?
- Comparing the current episode with the 2014 annexation of Crimea by Russia, we conclude that the market is pricing in a 10% probability of an invasion followed by crippling sanctions.
- With the currency not particularly cheap and given the asymmetric risk-reward, I would opt to not have any exposure to it for the time being.