Risk control mechanisms of third-party guarantee when financing newsvendor

Abstract

Two risk control mechanisms, namely, cash deposit, and loan limits based on retained profit or maximum expected guarantor profit, are developed for capital-constrained newsvendor financing. Results show that with a large initial capital or mortgage asset, the newsvendor reduces the order quantity to avoid bankruptcy risk. Under the risk control mechanism with a cash deposit, the guarantor gains greater profit when the newsvendor has a low initial capital. Setting a loan limit is thus an effective mechanism for newsvendors to not only reduce the bankruptcy risk, but also increase the guarantee profit. Numerical experiments also show that, compared with the risk control mechanism based on maximum expected profit, loan limits based on retained profit is more beneficial for the newsvendor, guarantee, and the bank.

Breakthrough Path of Low-Level Equilibrium of China's Policy-Oriented Financing Guarantee Market

“…Second, for the operating mechanism, the research results are mainly reflected in the comparison and selection of operating models (Craig et al, 2007 ; Beck et al, 2010 ), and the construction of operating systems (Boschi et al, 2014 ; Halunko et al, 2018 ), which suggest that financing guarantee business is generally implemented through policy-oriented guarantee (Luo and Huang, 2017 ). Third, in order to ensure the stable operation of policy-oriented guarantee mechanism, scholars further explored the issue of guarantee risk, including risk assessment of guarantee products (Kim and Ahn, 1997 ; He and Weng, 2014 ), identification of risk factors in guarantee networks (Berkman et al, 2009 ; He et al, 2019 ), guarantee risk control mechanism (Jeon and Sohn, 2008 ; Huang et al, 2021 ).…”

The Optimal Investment and Re-Guarantee Purchase of China’s Financing Guarantee Institutions Considering Risk Preference

“…is the first order derivative of the functional equation ) , ( i t f with respect to t. Substitute equations ( 18), (19) and (20) into equation (13) to get:…”

“…On this basis, scholars further explored the risk management and operating benefits of financing guarantee institutions. In terms of risk management, most scholars focused on risk assessment of guarantee products [7][8], identification of risk factors in guarantee networks [9][10], guarantee risk control mechanism [11][12][13], etc. ; while a few scholars studied the risk diversification under the multi-agent cooperation mechanism.…”

“…* , 𝛽 𝑡 * ) maximizes the equation(13), then G(t,x,i)= V(t,x,i)= 𝑉 𝛾 * ,𝛽 * (t,x,i) is established. Here, 𝑉 𝛾 * ,𝛽 * (t,x,i)=E[U(𝑋 𝛾 * ,𝛽 * (T))| 𝑋 𝛾 * ,𝛽 * (t)=x, αt=ℯi].…”

Additional contract selection and parameter design under supplier credit guarantee financing

“…Its essence is to realize the risk sharing between suppliers and banks. This study is motivated by real-world examples in which most banks, including Wells Fargo Bank, J.P. Morgan, Standard Chartered Bank, Bank of China, Evergrowing Bank, and Ping An Bank, have partnered with suppliers to provide CGF to capital-constrained retailers ( [20], [31]). Evergrowing Bank provided a loan to a mechanical equipment retailer in Ningbo province under the credit guarantee of a sizeable domestic machinery manufacturer ( [52], [37]).…”