New Research on the Performance of the Revenue Cash Flow Forecasting Model for Daily Revenue Obligations (DROs) and Daily Revenue Portfolios (DRPs)


30 May 2024

    HONG KONG, 30 May 2024. CSPI Ratings has released one research report, titled " Back-testing on the Revenue Cash Flow Forecasting Model for Daily Revenue Obligations (DROs) and Daily Revenue Portfolios (DRPs)." This study assesses the predictive accuracy of CSPI Ratings' Revenue Cash Flow Forecasting Model through out-of-sample and out-of-time back-testing across five months.

    The study shows that the portfolio predication error of CSPI Ratings’ Revenue Cash Flow Forecasting Model was only -1.01%, 1.12%, -2.85%, -2.07% and 0.8% respectively during the five months. In addition to the portfolio predication error, the model also performed well on key matrices such as Bias, RMSE and Out of sample R².

    Dr. Chen Ke, Chief Analytical Officer, said, “CSPI Ratings has conducted specific model development for Revenue-based Finance (RBF) represented by DRO. The model now has good predictive accuracy and the ability to adapt to changes in market dynamics. Despite the inherent uncertainties of individual small businesses, we have observed that their collective revenue streams tend to exhibit predictable patterns that can be effectively captured through our forecasting model. Accurate cash flow forecasting for DRO portfolios has a profound implication for RBF investors, financial institutions, and risk management strategies.”

    Dr. Chen further mentioned, “In addition to backtesting, this study also provides the forecasted revenue cash flows for the DRO portfolio for May 2024, which we will be evaluated against the realized value in our subsequent report. These out-of-sample forecasts will offer crucial insights into the performance of our forecasting model and the behavior of this asset class, which in turn will benefit capital market efficiency.”

    ANALYSTS CONTACT

    Primary Analyst

    Ke Chen, PhD

    +852 3615 8316

    ke.chen@cspi-ratings.com

    Secondary Analyst

    Bining Cai

    +86 755 8321 0225

    bining.cai@cspi-ratings.com

    Committee Chair

    Jameson Zuo, FRM

    +852 3615 8341

    jameson.zuo@cspi-ratings.com

    MEDIA CONTACT

    media@cspi-ratings.com

    RATING SERVICE CONTACT

    Allen Wei

    +852 3615 8324
    allen.wei@cspi-ratings.com

    Date of Relevant Rating Committee: 29 May 2024

    Additional information is available on www.cspi-ratings.com


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