CFA L1 / Econ / M5. Geopolitics
Module 5 · Economics

Introduction to Geopolitics

EN: Conceptual module — no formulas. Focus on cooperation/competition, risks, and how geopolitics affects investing.
VN: Module khái niệm — không công thức. Tập trung vào hợp tác/cạnh tranh, rủi ro địa chính trị.

1. Globalization Spectrum Concept

About: Globalization spectrum from autarky (closed) → hegemony → multilateral cooperation → bilateral/regional. Determines openness to trade and capital flows.Tóm tắt: Phổ toàn cầu hóa: tự cấp → bá quyền → đa phương → song phương/khu vực. Quyết định mức độ mở cửa.
  • Autarky Self-sufficiency, no trade.
  • Hegemony One country dominates.
  • Multilateral Multiple countries cooperate (e.g. WTO, EU).
  • Bilateral Two-country agreements.
  • Regional Geographic blocs (NAFTA, ASEAN).

2. Geopolitical Risks Concept

About: Three types: event (discrete, e.g. terror attack), exogenous (sudden broad shock e.g. pandemic, war), thematic (slow-burn e.g. climate, demographics). Different risk-management responses.Tóm tắt: 3 loại: event (rời rạc), exogenous (đột ngột rộng), thematic (chậm dài). Phản ứng quản trị rủi ro khác nhau.

Three risk types

  • Event Discrete, often unexpected — election results, terrorist attacks.
  • Exogenous Sudden, broad shocks — war, pandemics, regime change.
  • Thematic Slow-moving, long-running — climate change, demographic shifts.

3. Implications for Investing Concept

About: Geopolitical stress drives flight to safe havens (USD, JPY, CHF, gold, Treasuries). Sanctions and capital controls hit FX. Risk premia widen across asset classes.Tóm tắt: Stress địa chính trị → chạy về safe haven. Sanctions ảnh hưởng FX. Risk premia nới rộng.
  • Risk-on/off Geopolitical stress → flight to safe-haven (USD, JPY, CHF, gold, Treasuries).
  • FX Capital controls, sanctions affect currencies.
  • Commodity Energy and metals most directly exposed.
  • Risk premiums Sovereign and equity risk premia widen during instability.

Practice problem Practice

Practice problem

A sudden, broad shock — pandemic outbreak — disrupts global supply chains and equity markets. Which type of geopolitical risk is this?

Show solution
Event risk = discrete unexpected (election, terror).
Exogenous shock = sudden, broad, unexpected (war, pandemic, regime change).
Thematic = slow-moving (climate, demographics).
Exogenous shock