Pricing Study Of Supply Chain-Finance Sevice For Inventory Impawn Financing

This paper reviews the theory of supply chain finance, summarizes the external environment of the supply chain financial services and supply chain financial services framework. This paper highlights the inventory financing services. On the basis of the qualitative research, quantitative research on the two most commonly used variables in the financial services contract in the supply chain: the pledge rate and lending rates are conducted. Contract breach penalty mechanism of supply chain contract is introduced in this study. Two cases: the punishment of the contract breach are a fixed constant and variable are considered separately , there is an optimal pledge rate and lending rates in both cases, in pursuit of max expected return within tolerable risk. Based on the mathematical model, a numerical example is conducted to verify the conclusion of this article.This study concluded that, when other parameters are fixed, the greater inventory price volatility, the smaller the pledge rate. This is because the high volatility of stock price induces great liquidity fluctuations in the value of ending inventory. In order to reduce the high risk caused by the high volatility of inventory price, the pledge rate decreases. This study also shows that when other parameters are constant, the higher the loan interest rate, the lower the pledge rate. This is because of the high lending rate causes great final principal and interest .The corporate is more likely to breach the contract, greater bank risk causes lower pledge rate.The main innovation point of this paper is the introduction of a breach of contract penalty mechanism, the critical variables are researched in the supply chain financing through quantitative approach, which making the model more realistic. Two variables, the pledge rate and lending rate, are taken into account to prove the existence and uniqueness of the optimal pledge rate and lending rate combination in order to maximize the bank expected profit in the range of risk tolerance. In practice, the model in this study can be applied to determine the optimal pledge rate and loan interest rates, which provides a reference for financial institutions in the supply chain financing decisions.