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

Authors: Yang Huang; Wenxuan Wang; Qiangqiang Wang

Addresses: School of Economics and Management, Dalian University of Technology, Dalian, China ' School of Business Administration Dongbei University of Finance and Economics, Dalian, China ' School of Business Administration Dongbei University of Finance and Economics, Dalian, China

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.

Keywords: seller's option; buyback guarantee financing; bank credit financing; supply chain management.

DOI: 10.1504/IJMOR.2026.151176

International Journal of Mathematics in Operational Research, 2026 Vol.33 No.1, pp.88 - 112

Received: 27 Mar 2024
Accepted: 21 Apr 2024
Published online: 16 Jan 2026 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article