LONDON The big question about investor anxiety over Scotland's independence referendum is not whether it's warranted, but why it took so long to materialize and why it's still so marginal.
Even now, with opinion polls showing a near-equal split in Thursday's vote for and against Scotland's secession from the United Kingdom, market moves have been modest at most - especially when you strip out influences such as domestic interest rate speculation and the wider global economic pulse.
Against the prospect of a potentially messy break-up of the world's sixth largest economy, the relative calm is eye-opening, whether due to detached calculations about the outcome and risks, or a worrying nonchalance and perhaps even puzzlement.
For all the banner headlines of market fright surrounding the issue - mostly trumpeted by unionists - sterling's value against a trade-weighted basket of world currencies is still a full two percent higher in 2014 so far, even after its recent retreat from midsummer peaks.
British blue chips remain in the black for the year, clocking an annual performance little different to Germany's equivalent DAX and outperforming the Milan bourse over the past six weeks. Scottish-domiciled stocks have indeed underperformed over the past year, but only by a sliver of 2 percent and even that's narrowed rather than widened of late.
The yield that investors require to hold British government bonds has actually fallen, insulated by London's guarantee to honor all outstanding gilts regardless of the vote. Ten-year bond yields have lost half a percentage point this year - despite constant speculation that a rise in the Bank of England's benchmark interest rate is coming closer.
Any signs of angst and a dash to hedging are confined largely to the currency options market, where one-week implied sterling volatility against the dollar jumped to its highest in four years as polls shifted toward a 'yes' vote.
Yet at an annualized 17 percent, traders say this still only suggests a likely sterling gyration of about 4 cents from the current $1.62 over the week ahead. What's more, volatility implied out to three months only prices for a move in sterling/dollar of half the year's 12 cent peak-to-trough move so far.
CALM VS APOCALYPSE
All this apparent calm presents a somewhat surreal backdrop to dire warnings from some global investment banks on the potential shock of a Scottish secession and the cost to both Scotland and the rump United Kingdom.
Many warn about sterling's fate given London's opposition to nationalists' plans for a currency union. Other fears range through deposit flight from Scottish banks relocating south of border; a balance of payments drag between Scotland and its southern neighbor; and a threat of rising borrowing costs and swingeing austerity for the early years of a new Scotland.
Forecasts vary wildly, given that no one knows exactly how the subsequent year of negotiations would split oil revenues and debt repayment commitments between the separated nations. Some fear sterling would plunge if Scotland took the lion's share of North Sea revenues, leaving the rest of the United Kingdom with a grossly bloated current account deficit.
Deutsche Bank's chief economist David Folkerts-Landau only last Friday told clients Scotland's exit would be a mistake akin to missteps that triggered the Great Depression.
"We think financial markets, particularly the longer-dated FX options market, are significantly underpricing the risk of a 'yes' vote - and all the costs and uncertainty that would entail," economist and co-author of the Deutsche report Oliver Harvey told Reuters.
Goldman Sachs economist Kevin Daly reckons a surprise 'Yes' vote could have "severely negative" consequences for both a newly independent Scotland and remnant United Kingdom.
And long-standing bearish strategist Albert Edwards of Societe Generale warned of a serious sterling crisis and a possible unraveling of the United Kingdom and European Union akin to the collapse of the former Soviet Union in 1991.
Warning of everything from a rising payments gap to the increased likelihood of leaving the EU, Edwards said: "If investors are selling sterling in anticipation of a Yes vote, the economic reality of a rump UK will see sterling quite rightly plunge into the abyss."
If these commentators are correct, why hasn't the asset selling been heavier and swifter already? The 10-15 point gap in the polls for most of the year would have put secession as an outside chance but hardly a tail risk - never mind two polls in two weeks showing a lead for separatists.
Some investors insist they watch bookmaker odds as much if not more than noisier opinion polls. And despite the late surge in the 'yes' vote in polling, bookies' odds continue to show a 70-80 percent chance of the union remaining after Thursday.
Gambling company Betfair said on Tuesday it was so confident the status quo would prevail that it was already paying out more than 100,000 pounds ($162,000) to some customers who backed a "No" vote.
Asset managers emphasize that the event is just one of many political risks that have been effectively ignored this year as the flood of cheap money from major central banks drowns out almost all other influences.
And the cost of hedging or changing a portfolio on every major political risk is simply too costly to be viable, they say - not least because the great majority never materialize.
There is also the possibility that investors simply feel Scottish independence is manageable without dramatic or systemic upheaval - even if there are costs, uncertainties and difficulties ahead for both new countries that emerge. In that view, the detail of negotiations is everything and the minor shifts in allocations that we've seen are probably adequate for now.
"There may be a little complacency, but global investors compare this to similar more dramatic and systemic risks in recent years such as a euro breakup or U.S. default," said Valentijn van Nieuwenhuijzen, head of multi-asset investing at ING Investment Management. "This is just not on that level."
(Graphic by Vincent Flasseur; Editing by Ruth Pitchford)