An innovative stochastic dynamic model to three-stage supply chain finance

In this paper, we formulate a stochastic dynamic program for the three-stage supply chain finance problem from the perspective of banks. The objective is to maximize the expected income for the bank under three types of risks, i.e., supplier's credit risk, buyer's credit risk and inventory-in-transit risk. We contribute to the literature with an innovative mathematical model of supply chain finance problem, which is an emerging and eye-catching business itself. Solving for optimal policy of our problem will help banks tradeoff income against risks. © 2011 IEEE.