The iShares MSCO Emerging Markets Index ETF (EEM – 40.05) was down about 1% on the week and VXEEM rose over 8%. This rise of 8% is pretty dramatic for a relatively quiet although lower week. This rise in VXEEM can be attributed to a combination of the drop in emerging markets along with an elevated market risk outlook. VXEEM futures were already discounting more risk going into the autumn months and did not rise in the same magnitude as the spot index. The outcome was a flattening of the curve of VXEEM prices.
The iShares MSCI Brazil Index (EWZ – 54.25) was down 2% on the week as global stock markets were mostly lower. With EWZ under pressure VXEWZ rose almost 12% to 28.00. 28.00 would be a pretty dramatic level for most equity market volatility indexes, but is actually lower than average for VXEWZ. CBOE has VXEWZ data going back to March 2011 and the average for VXEWZ over this time period is 33.25. The futures contracts were higher, but not as much as the index which resulted in a flattening of the curve. As with VXEEM futures, VXEWZ futures were already pricing in a rise in volatility over the next few months.