This Week in Emerging Market Volatility – 1/24/2014

Apparently a good portion of the hub-bub this week about the markets had to do with the emerging market sector.  I was told that some issues around China may have contributed to the fall.  At CBOE we have a volatility index that is based on the Chinese market at CBOE.  Although we do not have futures or options trading on the CBOE China ETF Volatility Index (VXFXI – 27.31) it was worth checking the performance for a China Fear Index.  VXFXI was up 22.9% last week despite a 4.4% drop in the iShares China Large-Cap (FXI -34.22) last week.   On a percentage basis VIX was up 45% last week.  Maybe all the blame should not be placed on the Chinese markets.

The tradable volatility indexes were higher was well with VXEEM gaining about 39.5% and VXEWZ moving up by about 23%.  Both indexes were admittedly already at elevated levels relative to VIX, but did like VXFXI did fall a little bit short of the move higher in S&P 500 volatility.  Finally, and probably the most important thing to focus on regarding emerging market volatility is the VXEEM curve just below on the left.  The February VXEEM future is at a 2.26 discount to the spot index.  Also, March and April closed below February – the VXEEM shows that any concerns are currently not long term in nature.

VXEEM VXEWZ