Dear All;
Short Intro: I am trying to quantitativley estimate total risks of a b2b physical comodity trade with no future contracts or hedging (for now).
Having read and applied all feedback, I have assumed most risks to be operational, with the exceptions being Credit Risk (of buyer), Price Spread Risk (between Bill of Lading and SO creation date can be weeks) , Country/Political Risk ( inputted as probability of default of country wide companies based on their Moody rating). and Market Risk index (CBOE VIX). I have been able to assume a basic P&L equation for the cost and profit, and am applying a montecarlo to simulate the possible scenarios surrounding the assumed profit. My issue is finding a way to input the Market Risk Index (which the director is very keen on). The other risks I can relate to tangiable probabilities and variables in the P&L, but I am not sure how the CBOE VIX index can be inputed, whether as a timeseries or a Single value. How is the CBOE VIX index inputed into a P&L statement to account for market volitality?
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