Ref to my previous question here:

Physical trading spot transaction analysis-Quantified

I have been able to narrow down my aim to defining a physical trading strategy P&L. My question is, how the risks quantified in Indices (market risk) and those as scores (credit risks) are explicitly plugged into the P&L. I understand calculating risk of a portfolio of securities(Bonds and ETFS) with historical prices, the risks being the standard deviation of the returns plugged into a mean variance optimization. In cases like physical commodities trading, where prices are stable (and agreed upon) but factors like credit scores and political risks of countries come into play, how are they incorporated into a quantified strategy?


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