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Volatility Index

We construct an implied, forward-looking, volatility index for the Brazilian stock market. We name it "IVol-BR". Our methodology combines standard international methodology with adjustments we propose to take into account the relatively low liquidity of options over IBOVESPA. We then decompose the IVol-BR into two components: the "variance premium" and the "expected variance". From the variance premium we extract a time-varying risk aversion coefficient for the Brazilian investor. Series can be downloaded below. Details can be found in this paper.