Criterion of Test Statistics for Validation in Credit Rating Model Park, Yong-Seok; Hong, Chong-Sun; Lim, Han-Seung;
This paper presents Kolmogorov-Smirnov, mean difference, AUROC and AR, four well known statistics that have been widely used for evaluating the discriminatory power of credit rating models. Criteria for these statistics are determined by the value of mean difference under the assumption of normality and equal standard deviation. Alternative criteria are proposed through the simulations according to various sample sizes, type II error rates, and the ratio of bads, also we suggest the meaning of statistic on the basis of discriminatory power. Finally we make a comparative study of the currently used guidelines and simulated results.
Accuracy ratio(AR);area under ROC(AUROC);discriminatory power;mean difference;type II error rates;