Associated credit risk contagion and spillover effect based on supply chain buy-back guarantee contract

Abstract

We take the supply chain with a supplier and a retailer as the research objects and study the contagion and spillover effect of the associated credit risk in the supply chain under the scenario of the buy-back guarantee contract. The associated credit risk in the supply chain refers to the phenomenon that the credit default of the retailer causes the credit default of the supplier or increases the probability of default. The buy-back guarantee in the supply chain refers to the assumption by the retailer of the supplier's buy-back contract as a financing mechanism. At present, the buy-back guarantee has become a new channel of contagion for the associated credit risk in the supply chain. Under the dual Stackelberg game analysis framework of the lending institutions, suppliers, and retailers, this paper clarifies the contagion mechanism of associated credit risk in the supply chain under the condition of the buy-back guarantee and constructs mathematical models to explore the contagion and spillover effect of the associated credit risk in the supply chain. The results show that, under the condition of the buy-back guarantee, the contagion effect of the associated credit risk in the supply chain has trigger thresholds, and the probability of triggering the contagion effect is related to the retailer's order quantity, supplier's wholesale price, and product's market price. The contagion effect is positively affected by the buy-back rate, production costs, and loan interest rates and negatively affected by the product's market price. In contrast, the degree of buy-back guarantee aggravates the negative spillover effect of the associated credit risk and raises the risk level of lending institutions.