Portfolio Stability Index
From Open Risk Manual
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Contents
Definition
Portfolio Stability Index (PSI, more general: Population Stability Index) is a measure of the divergence of frequency distributions between two samples (typically over time)
Usage
The index is used to measure the divergence between a development sample and the current portfolio as part of monitoring or Credit Scorecard Validation.
Formula
- Failed to parse (lexing error): PSI = \sum_i (\frac{A_i}{A_T} − \frac{M_i}{M_T}) log(\frac{\frac{A_i}{A_T}}{\frac{M_i}{M_T}}
where
- is the i-th Credit Score band
- is actual default rate for class i
- is modelled default rate for class i
- are the total actual and modelled default rates respectively