In a product market with price-sensitive demand, we examine supply chain consisting of one manufacturer and capital-constrained retailer. The retailer may purchase by borrowing securing confirmed warehouse financing (CWF) from competitive bank or the manufacturer's trade credit (TCF), provided that it is also to latter's benefit extend TCF. We obtain optimal pricing decision in two modes under ...

Given the worldwide financial market confusion caused by the subprime mortgage problem and the increase in credit line contracts with relaxed covenants, there have been cases in which financial institutions are facing a demand to provide additional credit to securitized vehicles with heightened liquidity and credit risks. These are typical examples demonstrating the importance of risk managemen...

A thorough understanding of the joint default behavior of credit-risky securities is essential for credit risk measurement as well as the valuation of multi-name credit derivatives and Collateralized Debt Obligations. In this paper we study a simple and tractable intensity-based model for correlated defaults, in which unpredictable default arrival times are jointly exponentially distributed. Si...

A thorough understanding of the joint default behavior of credit-risky securities is essential for credit risk measurement as well as the valuation of multi-name credit derivatives and Collateralized Debt Obligations. In this paper we study a simple and tractable intensity-based model for correlated defaults, in which unpredictable default arrival times are jointly exponentially distributed. Si...

We review different methods for simulating credit migrations in a nonparametric and discrete or continuous-time Markov chain framework. We suggest the application of a factor model approach in combination with the use of copulas for the joint dynamics of credit rating changes. While there are several applications of copulas in credit risk for modeling joint defaults, it lacks of the same intere...

This paper studies supply chain financing. We investigate why a firm extends trade credit to its customers and how this decision relates to its own financing. We use a novel firm-level database of Chinese firms with unique information on market power in both output and input markets and on the amount, terms, and payment history of trade credit simultaneously extended to customers (accounts rece...

In the newsvendor problem, a decision maker chooses an inventory order quantity prior to the realization of a random demand. The decision maker faces a trade-off between ordering too many and having leftover inventory versus ordering too few and missing out on potential sales. Keeping the net profit structure constant, we study how the timing of the payments affects the inventory decisions. Spe...

This paper presents the economic ordering policies of time-dependent deteriorating items in presence of trade credit using of discounted cash-flows (DCF) approach. In inventory analysis a DCF approach permits a proper recognition of the financial implication of the opportunity cost and out-of-pocket cost. In the inventory model, shortages are not allowed. In this study mathematical models are a...

This paper investigates how the supplier’s bargaining power affects trade credit supply. We use a novel firm-level database of Chinese firms with unique information on the amount, terms, and payment history of trade credit extended to customers and detailed information on product market structure and clients-supplier relationships. We document that suppliers with weak bargaining power towards t...