LONDON - Relative calm on global markets during the latest Greek debt standoff more closely reflects the low probability assigned to a euro exit than how contained such a shock could be.
As Greece has returned to the precipice of another default and the outsize chance of Grexit - Greece being forced out of the euro zone - world markets have barely flinched.
Unlike the previous Greek crisis in 2012, the assumption is that banking and private sector exposure has been cut to near zero, financial firewalls have been put in place in the euro zone, and world prices have the Grexit risk factored in.
But no one really knows the true consequences of such an unprecedented move. What's more, investors' ability to discount low-probability but high-impact events - what are called tail risks - has been found wanting in the past, most spectacularly before the Lehman Brothers bankruptcy in 2008.
A look at market pricing in the period before Lehman's collapse is instructive.
In early 2007 the VIX index measuring U.S. stock market volatility was its lowest ever, around 10. That rose to around 20 in early September 2008 then a record 80 after the bank's collapse later that month unleashed the global financial crisis.
It was a similar pattern in U.S. Treasury market volatility and the so-called "TED spread", a key measure of financial market stability showing the gap between three-month Libor rates and comparable U.S. government borrowing costs.
Even the bookies were caught off guard.
The odds on September 12 of Lehman going bust, just three days before it actually did, were 4/5, or a 56 percent chance, according to PaddyPower. That had come from a 25 percent on Sept 1 and just 7.7 percent at the end of March.
Now, few people are expecting Grexit. While bookmaker William Hill has closed its Grexit book, rivals PaddyPower and Ladbrokes are attaching a 44 percent probability of Grexit this year, and Betfair only 27 percent.
The VIX index was last hovering around 13, close to its historic low, and sharply down from the 50-mark reached when the euro zone debt crisis reached boiling point in 2011.
The latest Reuters poll of traders saw just a 30 percent chance of Grexit and polls consistently show that more than 70 percent of Greeks want to stay in the euro. [ID:nL5N0YJ2KX]
Markets were clearly too complacent in 2008. Are they too complacent now?
"No-one should have a false sense of confidence that they know what the result of a crisis in Greece would be," U.S. Treasury Secretary Jack Lew said in London on Wednesday.
"The notion that the risk that is completely contained, that there's no contagion ... I think it's a mistake to think that a failure is of no consequence outside of Greece."
Deutsche Bank also said this week that Grexit posed the biggest single risk to its generally benign view of the global economy this year - by some distance a bigger risk than an economic slump in China, an emerging market crisis, a prolonged U.S. slowdown and sharp correction in financial markets.
Greece could default on an International Monetary Fund loan repayment on June 5 if it can't agree a new deal with its international creditors.
While the fallout from that is simply unknowable, some argue that direct comparisons with Lehman are mistaken because Grexit, if it happens, won't be a complete shock.
"Grexit is largely priced in and, while not desirable, it wouldn't be the end of the world. Unlike with Lehman, I see more healthy paranoia than complacency," said Nassim Nicholas Taleb, professor of risk engineering at New York University.
Taleb famously came up with the "Black Swan" theory, a metaphor for events that take financial markets by surprise and have a major effect, and are explained after the fact - often wrongly - with the benefit of hindsight.
Comparisons with last year's Scottish referendum may be more accurate than Lehman. The break-up of the United Kingdom was roundly dismissed for nearly two years only for some polls to show it was a very close call just days before the September 18 vote, stiring markets up.
Bookies, however, consistently said it wasn't on the cards. And aside from that late flurry, financial markets largely dismissed it too. As it turned out, they were right to, because Scotland voted against independence.
The European Central Bank repeated its line on Thursday that contagion from Greece remains limited but noted the risk of default has risen sharply.
"Grexit would be a collective political failure. Above all, it would cause a social and economic catastrophe for Greek citizens," the Eiffel Group and Glienicker group wrote in an opinion piece published last week on Brussels-based think tank Bruegel's website.
Additional reporting by David Milliken and Jemima Kelly Editing by Jeremy Gaunt