Difference between revisions of "Portfolio Stability Index"
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== Formula == | == Formula == | ||
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− | PSI = \sum_i (\frac{A_i}{A_T} | + | 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}} |
</math> | </math> | ||
Revision as of 17:32, 17 February 2022
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
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