Hazard Rate
From Open Risk Manual
Definition
The Hazard Rate function in the context of Credit Risk modelling is the rate of default computed at any time, assuming that the obligor has survived up to that point. Another name for the hazard rate is the Marginal Default Probability
Usage
- A hazard rate can be either a discrete function (with support on a set of observation points) or a continuous function
- It can be a direct empirical estimate or an ingredient in the definition of a theoretical Default Process (a Hazard Rate Model)
- The shape of the hazard rate function captures the credit Term Structure
