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Chinese Journal of Management Science ›› 2020, Vol. 28 ›› Issue (1): 68-78.doi: 10.16381/j.cnki.issn1003-207x.2020.01.005

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Risk Control of Supply Chain Finance based on Revenuesharing-bidirectional Option Contract

JIN Xiang-shu1, YUAN Wen-yan2, WU Jun1, LI Jian3, WANG Ya-jing3   

  1. 1. School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China;
    2. College of Mathematics and Physics, Beijing University of Chemical Technology, Beijing 100029, China;
    3. Research Base of Beijing Modern Manufacturing Development, College of Economics and Management, Beijing University of Technology, Beijing 100124, China
  • Received:2018-03-04 Revised:2018-11-26 Online:2020-01-20 Published:2020-01-19

Abstract: As the small and medium enterprises(SMEs) involved in supply chain, measuring their default risk becomes a critical issue for commercial bank to enhance their profitability in this fierce competition. Among the enterprises in supply chain, the core company plays an important role that could help SMEs obtain loans more successfully that can make supply chain finance operate more efficiently.
A two-echelon supply chain consisting of a distributor (the core company) and a retailer (the small and medium enterprise) is investigated in this paper. According to the literature review, revenue sharing-bidirectional option contract could coordinate supply chain and improve the income of the retailer and the distributor. Furthermore, it is straightforward that the retailer's default risk will be reduced if the income of the retailer is improved. Hence, the distributor and the retailer would like to introduce revenue sharing-bidirectional option contract. Based on the classical newsvendor model, the probability of retailer's default under the revenue sharing-bidirectional option contract is calculated.Then the optimal initial order quantity, the optimal quantity of option purchased by the retailer, the optimal revenue sharing ratio, the range of revenue sharing ratio, and the profit of each party are obtained respectively. Finally, some numerical examples are conducted and the impact of some key parameters is analyzed such as the option execution price, the profit sharing ratio, and the bank pledge rate. It can be found that the default probability will increase with the increase of the proportion coefficient of revenue sharing, the guarantee rate, and the purchase price of unit option, among which the proportion coefficient of revenue sharing has the largest impact on the default probability, followed by the guarantee rate and finally the purchase price of unit option. As the execution price of put option increases, the probability of the retailer's default will decrease.
This paper aims at illustrating how the proposed model can be applied to assess small enterprises default risk and exploring the risk control of supply chain finance based on revenue sharing-bidirectional option contract.The findings of the paper provide management insights for the bank and the enterprises.

Key words: risk control, supply chain finance, revenue sharing-bidirectional option contract, probability of default

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