Setting Initial Margin Of Procurement Execution

Based on real trade background, procurement execution uses "initial margin and the pledges" to release credit risk. In practice, logistics enterprises refer to commercial Banks practice of logistics financial business for the initial margin, it required20%-30%, while commercial Banks adopt comprehensive experience valuation method to determine the initial margin, which hardly to accurately reflect the ability of bearing risk. Therefore, it is vital to set the initial margin by building mathematical models, which is not only to control the risk of procurement execution, but also to guarantee the development of the business.This paper set initial margin to management price risk from the perspective of financial risk management and game theory respectively. Firstly, we take comprehensively account about the liquidity, the risk preference of logistics enterprises and the credit level of loan enterprises etc., and then we put forward to set initial margin to manage price risk in the given window. Compared with pledging loan business such as bonds and stocks, procurement execution risk measure is mainly to predict the long-term price risk. As spot copper a sample, the paper established VaR-GARCH(1,1)-GED and ES-GARCH(1,1)-GED model, which can depict peak fluctuations and fat-tailed features of daily yield, and gave expressions of long-term risk VaR&ES, then got the common initial margin(VaR) and the caution initial margin(ES),finally found the elastic range of initial margin. We use the way to build a model which shows that the result based on VaR and ES dynamic margin setting of the initial elastic range, could effectively cover of financing risk and reduce the financing cost of the borrowing enterprise than the existing static margin ratio.Secondly, from the point of logistics companies and small enterprises, the article also applies game theory to determine initial margin under complete information and dynamic game model. By analyzing the price of spot copper, we find:ã‚œecause of different expectation for the lowest price, different logistics companies request different initial margin. Risk preference makes the use of low initial margin ratio strategy, while risk aversion likes high initial margin ratio. However, compared with the initial margin ratio in the paper, the current margin ratio not only high, but also not control risk effectively.â‘¡Lower initial margin ratio makes low default cost, this increase the default of small enterprise and do not conducive to the healthy development of procurement business. On the other hand, higher initial margin compels the lower risk customers quit off the market of procurement business, and the adverse selection and moral hazard will eventually harm the interests of logistics enterprises.â‘¢Compared with the once deal, it is beneficial to both participators seeking long-term cooperation. The initial margin is optimal in this case.In summary, this paper debates the helpful way to control the risk and at the same time, provides quantitative decision-making basis for the logistics enterprises to set up the initial margin.