Andrew Karolyi, an expert on global business, international finance and a professor of Finance and Global Business at Cornell University’s Samuel Curtis Johnson Graduate School of Management, describes how global investors hope to contain risks of an ‘international financial contagion’ spilling over from instability in Ukraine.
“When geopolitical tensions rise, whether nationally or regionally, investor risk aversion spikes and fundamental risks get re-priced. With respect to the Ukraine, our immediate focus is on securities in the foreign exchange and commodity markets, like the rouble, hyrvnia, Ukraine’s sovereign bond yields, Russia’s RTS index, and oil prices.
“The real question for global investors and CFOs alike is whether and how these revaluations sparked by events in Ukraine spill over into those of other, more stable securities in the form of an international financial contagion. We have seen it before. The key to containing these risks is to be able to pin down the potential real and financial channels through which the contagion might propagate.”