Abstract
Credit risk is a major risk of supply chain finance business, and it has recently gained increasing attention. Due to the high dependence between enterprises, the assessment of the supply chain finance risk will be more complicated. In the current study, the research subjects are almost the single financing enterprises, and the credit risk of financing enterprise portfolio in supply chain finance has rarely been discussed. This study aims to establish a complete risk assessment model, which is based on modified KMV model and Copula function, to quantify the credit risk of enterprises in supply chain finance. Based on the model, we can measure the credit risk of the single financing enterprise and financing enterprise portfolio (up- and down-stream) in supply chain. The results indicate that default contagion does exist in supply chain and the intensity of default contagion between enterprises in the financing enterprise portfolio is asymmetrical. Moreover, the conclusions about the joint expected default frequency and conditional expected default frequency of financing enterprise portfolio in supply chain, are of great significance to commercial banks and other financial institutions.
Highlights
As an innovative way of financing, supply chain finance (SCF) has shown increasingly vitality in the enterprise financing market of China [1], which participants include supply chain node enterprises, financial institutions and other supportive parties [2]
This paper proposes to establish a complete risk assessment model of automobile SCF in China, which can measure the credit risk of the single financing enterprise, and quantify the credit risk of financing enterprise portfolio in supply chain
RISK ASSESSMENT MODEL The purpose of this paper is to study the credit risk of single financing enterprise and financing enterprise portfolio in SCF
Summary
As an innovative way of financing, supply chain finance (SCF) has shown increasingly vitality in the enterprise financing market of China [1], which participants include supply chain node enterprises, financial institutions and other supportive parties [2]. The relations between financing enterprises in SCF are in logistics, capital flow, information flow and business flow, and include the financing guarantee relationship of mutual credit support and joint liability [4], [6]–[8]. Due to the existence of financing guarantee relationship, there is default dependence between enterprises in SCF, which is difficult to capture and is ignored These deficiencies and the complex relationship between enterprises increase the difficulty of financing and make the credit risk more difficult to control. M. Zhang et al.: Quantifying Credit Risk of Supply Chain Finance of SCF. This paper proposes to establish a complete risk assessment model of automobile SCF in China, which can measure the credit risk of the single financing enterprise, and quantify the credit risk of financing enterprise portfolio (up- and down-stream) in supply chain.
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