A Marine Le Pen victory in the French election is unlikely, but due to the potentially devastating fat tail nature of such an outcome, stress testing for extreme model divergences should be a priority, a March 28 UBS Global Macro Strategy report observes. To conduct their stress test, the UBS team, led by Strategist Lefteris Farmakis, considers two levels of “interconnectedness,” a term often associated with stress. In the end, a Le pen victory could result in a more meaningful market event by a magnitude of five than the worst Greek nightmare that could have occurred over the past few years, the report said.
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