The Credit Insurance Policy Ledge Financing in the Case of Default

Abstract

Abstract:

In order to solve the problem of financing of the manufacturer and the retailer, a credit policy pledge financing model is constructed. Based on the newsboy model of stochastic programming problem and game theory, the different interest rates under conditions of retailer′s ordering decisions, bank interest rate decisions and insurance decisions of the manufacturer are analyzed. The analysis shows that the retailer controls the default rate and obtains the profit by the reasonable order quantity. The manufacturer achieves benefits through reasonable insurance level and wholesale price decision. In order to achieve profits, banks determine a reasonable rate of interest as well as the manufacturer′s insurance level, to determine the amount of financing. Manufacturers and banks want retailers with a low default rate. Credit insurance is beneficial to all parties in financing.

Key words: default rate, credit insurance, insurance policy pledge

GAO Qian, WANG Wenli, GUO Zhifang. The Credit Insurance Policy Ledge Financing in the Case of Default[J]. Industrial Engineering Journal .

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