Research On Inventory Financing Risk Management Based On VaR Model

Nowadays, every commercial bank faces keen competition，and the morecompetitions they face,the more Pioneering spirit they have. To adapt to the socialdevelopment, they developed a lot of new financing business, and the inventoryfinancing is one of the most important ways for Supply Chain Financing. However,the pledge for inventory financing of is quite single, especially for steel products. Ittakes great risk to the bank because of the price decreasing of the steel.According to the existing practice and the theoretical research today, riskmanagement of Inventory finance is the key to restrict its development. And theimportant element for risk management is the risk measurement of the inventoryfinancing.It is important to choose the pledge for the business of Inventory financing.After choosing the pledge, banks will focus on the value of pledges, and the value ofthe pledges is being reflected by its price. The random fluctuation of the pledge price,as well as the existing of many other substance, will increasing the difficulty of therisk management.This article takes a single pledge for example, to measure the price risks ofsingle pledge through the VaR (Value at Risk, VaR) model.On this basis, the articleuse historical simulation to calculate the individual VaR of two different pledges, andthe Portfolio VaR of pledge combination of two different properties, to compare andanalyze the price risks between the single pledge and the different pledges, whichprovide a control policy to price risk of inventory financing to the commercial banks.