Wrapping the Christmas Risk
Supply-chain credit risk is a continuous risk vendors and suppliers face, and it is a risk that has some extra venom during the holiday season. With a
highly distressed retail sector, suppliers are, as always, seeking to offset their exposure to troubled retailers should the retailers fail before paying for their merchandise. To address this risk, suppliers often enter into
vendor puts, offloading the nonpayment risk to a bank or, increasingly, an
investment fund. Of course, financial institutions taking this non-payment risk are not drinking the eggnog and gambling on the retailers performing. Instead, investors in vendor puts typically