Optimization Research On Loan-to-Value Ratio Of Inventory Financing Under Uncertain Price And Demand

Inventory financing is one of the most important forms in supply chain finance.It's an important force to boost economic development and raise competitive power of enterprise.The successful development of inventory financing business provides a low-cost financing platform and high-efficiency operation platform for SMEs(Small and Medium Enterprises)which are weak in financial support,cost capability and risk management.And it also explores a new growth point of profit for third party logistics enterprises in the global competitive environment.Meantime,inventory financing develops a new risk management and liquidity management path to enrich the source of income for traditional financial institutions.Inventory financing transforms part of SMEs' credit risk into collateral's price risk of.In order to reduce price risk effectively,financial institutions need to determine the reasonable loan-to-value ratio.The optimization of loan-to-value ratio is the frontier research direction of supply chain finance in recent years,which has important theoretical significance and broad application value.With regard to the problems of loan-to-value ratio decisions on inventory financing,this paper discusses the optimization of loan-to-value ratio under the condition that the market price is linear with demand.Firstly,according to the relationship between market demand and pledge quantity,the market price of collateral is divided into two intervals.Secondly,according to the relationship between the market value of collateral and the repayment principal and interest,the loan-to-value ratio is divided into three intervals.Thirdly,this paper calculate occurred probabilities and expected profits in the six cases.Lastly,this paper establish the inventory financing expected profit model by means of piece-wise function.Finally,the analytical method was employed to solve the optimal loan-to-value ratio.In order to verify the feasibility and practicability of this model and its algorithm,the model is applied to the numerical example.Considering the different default probability in different financing enterprises,and the fluctuation of market price and demand,this paper performs the sensitivity analysis.It verifies that the optimal loan-to-value ratio will decrease quickly along with the increasing of default probability.Furthermore,it will increase first then decrease later along with the increasing of mean of market price,and the more strenuous the price fluctuates,the smaller the optimal loan-to-value ratio is.