Explain K-S statistics and Population stability index.

K-S Statistic is the measure of the maximum distance between two population distributions. This parameter is useful when discriminating default accounts from non-default accounts is required.

Population Stability Index is a measure which is used to measure the drift in current population on which the credit scoring model will be used is the same as the population with respective to development time:

a) When PSI<=1

It states that the characteristics of the current population with respect to the development population have no change.

b) 0.1< PSI>

It states that some change has taken place and warns for attention, but can still be used

c) PSI>0.25

This indicates a large shift in the score distribution of the current population compared with development time