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The strategic value of seller's option in buyback guarantee financing

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  • Yang Huang
  • Wenxuan Wang
  • Qiangqiang Wang

Abstract

This paper extends traditional bank credit (BC) and buyback guarantee (BG) financing models by considering uncertain salvage value, and proposes a novel buyback guarantee financing with seller's option (SBG). We derive the optimal decisions for the bank, retailer, and manufacturer under each financing scheme. Additionally, we compare the optimal decisions for the retailer and manufacturer when the BC contract, BG contract, and SBG contract are feasible. The results reveal that the optimal financing schemes for the manufacturer and retailer are not always aligned. Both parties stand to increase profits with the SBG contract compared to other contracts when the salvage value is high. Furthermore, there is a significant range where the supply chain could generate greater profits with the SBG contract compared to other contracts.

Suggested Citation

  • Yang Huang & Wenxuan Wang & Qiangqiang Wang, 2026. "The strategic value of seller's option in buyback guarantee financing," International Journal of Mathematics in Operational Research, Inderscience Enterprises Ltd, vol. 33(1), pages 88-112.
    • Handle: RePEc:ids:ijmore:v:33:y:2026:i:1:p:88-112
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