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Investors may love golf and grouse shooting, but they see an independent Scotland as on a par with a damp, midge-infested picnic in the heather.

Until mid-July, investors took the market’s usual approach to small but important risks: by ignoring entirely the danger of Scotland voting to leave the UK. Since then, they have begun to think about hedging against the break-up of the union, by selling sterling.

Quite how much of the pound’s fall from a peak of $1.71 to $1.65 has been down to Scotland is hard to judge. But, on Tuesday, market concern was clear as a poll showing rising support for independence spooked currency traders.

Most obviously, it also prompted a rush to use options to protect against the pound’s fall, pushing one-month implied volatility, similar to the Vix, up by the most in three years.

Does this make sense? Such a big move on the strength of one poll is silly. Voting intentions have been all over the place, and the wider polling picture is similar to April.

On the other hand, it makes sense to have some protection against the possibility of 5m Scots leaving the union. There is still no risk of gilt-edged securities becoming kilt-edged, thanks to London’s guarantee. But the uncertainty of drawn-out independence negotiations after a Yes vote would be horrible for investors in British assets – and truly awful for investors in Scottish assets. Few of these can be easily and directly hedged, hence the positioning in the pound.

One alternative is suggested by Ewen Cameron-Watt at BlackRock: buy protection against default by Royal Bank of Scotland using credit default swaps. This is cheap to do, and seems unaffected by the risk of RBS becoming a huge bank in a small country.

Ultimately, London would have to stand behind RBS, and it would probably shift its HQ south. But it is easy to see how fears among investors and depositors after a Yes vote could push the CDS up a lot in the short term, before the Treasury and Bank of England – ironically founded by a Scot – stepped in.

james.mackintosh@ft.com

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