The Bank's Risk-control Research Of Inventory Financing In Supply Chain Finance Based On VaR

In inventory financing of supply chain financial (SCF), banks reduce the risk of thedecline in value of the collateral with the method of catalog management, which ensurethe collateral equip qualities such as value-stability and easy-storage. Nevertheless, thestability in price of collateral has impacted the risk level of banks during the extension ofthe business and diversification of collateral types. For this reason, in order to control therisk, loan-to-value rates (LTV) and pledge rates (the ratio of collateral to procurement)are taken as risk-controlled variables in modeling the decisions of LTV, LTV and pledgerates, as well as LTV and pledge rates under diversity risk tolerances, considering withthe pattern of inventory financing of SCF; the affects of the financial position andprocurement activities of the retailer downstream supply chain; as well as the influenceof market demand and price of the collateral, based on the basic model of value-at-risk(VaR).First and foremost, it is analyzed that the linear or nonlinear relationships betweenthe value-at-risk of loans and LTV, the influence of LTV to risk management of banks,and method for banks to decrease the expected worst loss of a loan to some extent fromthe perspective of VaR in the model of LTV decision. Second, the model taken LTV andpledge rates as risk-controlled variables discuss the affects of both LTV and pledges ratesto the value-at-risk of loans. Specifically, it's talked over that the linear or nonlinearrelationship between the risk-controlled variables and value-at-risk of loans and that ofthe critical points that could change the correlations, as well as the influence ofprocurement to value-at-risk of loans when LTV and pledge rates are given value, underseveral constraints contrary to value-at-risk of loans through modeling analysis.Furthermore, based on the LTV and pledge rates model, the risk tolerance of banks isthought over during the analysis of those above relationships and influences.Several conclusions can be demonstrated over analysis of models and that ofnumerical examples, such as there exist the critical points of LTV that could transformthe correlations between the value-at-risk of loans and the risk-controlled variables in thesituation of the amount of purchase of retailers is given value, and banks might makedecisions according to the critical points of LTV; in the case of dramatic decline of thecollateral value, there exist the nonlinear relationship and positive correlation betweenLTV and value-at-risk of loans, specially, the value-at-risk of loan infinitely close tosome value when the value of LTV is increasing; the pledge rates might besimultaneously affected by the initial wealth of retailers, amount of procurement and wholesale price, and the relationship between pledge rates and value-at-risk of loans isinstable in diversity situations, that is, no relatively unity method could be found tocontrol the risks of the bank, which is one of the deficiencies of this article.