Controlling Risks Of Warehouse Receipt Pledging By Hedging Mechanism

With the continuously development of economy and popularity of market demand, warehouse receipt pledging become a new method of financing. Compared with traditional financing method, it obtains current assets from the third-part logistics enterprise as collateral to achieve a tripartite win-to-win situation. The method can not only solve the problem of credit system’incomplete, but also alleviate the SME’difficult situation. In the past several years, the number of SME increased rapidly, their competitiveness enhanced and they contribute more and more to the country’ economy development. However, it is difficult for them to expand production because they don’t have collateral to finance. The research proposed a method to obtain pledge ratio to ensure the success of financing.Firstly, the thesis introduces the concept and three mode of warehouse receipt pledging and draws the flow chart for each mode. Then, we analyze the connections of all participants based on principal-agent theory. After that, the paper classifies the risk in process of warehouse receipt pledging financing into five aspects:market risk, liquidity risk, credit risk, management risk and legal risk. Finally, it discussed the method to fix pledge ratio.The core of the article is divided into two parts:the first part is to determine the pledge ratio based on existing researches. The paper applies the non-linear programming method to obtain the pledge ratio under the condition of constrained maximization of the tripartite profits. On this basis, we discuss the pledge ratio under multi-stage financing situation. The second part is to modify the model considering the futures market risk hedging mechanism.The innovation of the thesis is to determine the pledge ratio in a more scientific and accurate way by applying futures market risk hedging mechanism to avoid market risk and liquidity risk of collateral. In addition, it maximizes the overall interests considering maximization of both parties. Naturally, there are limitations including the hedging mechanism can only used by the enterprises that operate futures products or future-related products. Besides, the model doesn’t consider the problem of benefits distribution.