Emerging market volatility has been elevated the past few weeks versus implied volatility as indicated by VIX. I had not run a direct comparison of VXEEM versus VIX until this weekend and was truly surprised at just how high VXEEM is relative to VIX. CBOE has data available for VXEEM going back to March 2011. Over that time a ratio of VXEEM divided by VIX would yield an average result of just over 1.40. The highest level ever was 1.9853 which was actually achieved on Friday July 5th. This ratio is still at pretty high levels finishing the day at 1.9718, mostly due to the drop in VIX relative to VXEEM this past week. The chart below depicts this ratio with the average level of 1.40 highlighted with a red line.
Both VXEEM and VXEWZ both dropped last week based on lower US and emerging markets moving up on the week. The curves are still a bit inverted, but not nearly as much as it has been over the past few weeks.