Hazard Rate Model
From Open Risk Manual
Definition
A Hazard Rate Model is a parametric model of a Hazard Rate.
In the context of Credit Risk modelling is a modelled rate of default computed at any time, assuming that the obligor has survived up to that point.
Choices for hazard rate functions
- Flat: This is the simplest hazard rate model. It assumes a constant hazard rate
- Piecewise linear: The default process is assumed to have linear slope between observation points
- Piecewise constant: The default process is assumed to have a constant rate between observation points
- Parametric Forms: The hazard rate is modelled using an explicit function (exponential, gamma, etc)
