The Week in Emerging Market Volatility – 10/13 – 10/17

Both EEM and EWZ moved higher last week, despite the drop in the S&P 500. Also, the respective volatility indexes moved up based on an increase in global equity risk perceptions. I’ll start here with the duller of the two and talk about VXEEM.

EEM rose just over .5% and VXEEM was up over 10% for the week. On Wednesday, when the world appeared to be coming to an end, VXEEM finished the day at 31.90 for the first closing price in the 30’s since December of last year.


Next weekend the people of Brazil will choose to keep their existing President or vote in a replacement. The implied volatility of options on EWZ has been elevated and rising leading up to next weekend. Even the most casual of market observers should be aware of the impact the uncertainty of this election has been having on VXEWZ.


The curves below reinforce the election’s impact on EWZ implied volatility. This very unusual shape has been in place for a while with the October contract, which expires this week, being at elevated levels since VXEWZ is expected to be high until next weekend. Just past October, the November contract is at a much more reasonable level which indicates the political storm will be over by then.