Cumulative Default Rate

From Open Risk Manual


The term Cumulative Default Rate is used in the context of multi-period credit risk analysis to denote the empirical (or modelled) default rate observed in a certain portfolio as it cumulates (aggregates) up to a final point in time.

The cumulative default rate up to time period k is denoted \mbox{CDR}_{k} and can be considered as the integral (sum) of the Incremental Default Rate


The cumulative default rate during period k, given an initial count of N0 and incremental default rate NtD

\mbox{CDR}_{t} =    \sum_{k=1}^{t} \frac{N^{D}_k}{N_0} =   \sum_{k=1}^{t} \mbox{IDR}_{k}

See Also