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.