hazard rate

[rickm123]

Is the hazard rate = default intensity rate = PD

are these used interchangably?

Thanks

 

[David Harper CFA FRM]

Hi Rick,

I hope Aleksander gets a chance to look/reply, too, as i have a feeling he has experience on this. My view is, YES, denotation-wise they are all conditional probabilities of defaults, so i would be careful about "PD" as "PD" is unspecific (e.g., unconditional PD, conditional PD, cumulative PD). But, I believe that:

• conditional PD = hazard rate = default intensity; but connotation-wise:
• conditional PD connotes discrete, whereas hazard rate and default intensity connote continuous

So i've found that hazard rate/default intensity CONNOTE instantaneous conditional PDs (i.e., in the continuous time space), as for example, Hull employs them. So, I have found that we might say: hazard rate/default intensity refers to the continuous time special case of conditional PD. I'm less than 100% sure on this, so i'd look forward to corroboration?

 

[W0LF]

Sorry, probably an obvious answer but Conditional PD is conditional upon what?

 

[W0LF]

Is it conditional upon survival (1-h) up until time t, in other words tis relates to P(t*, cond(t>t*<t+tau))?

 

[afterworkguinness]

It's conditional upon survival up to that instant in time.

 

[W0LF]

thanks for the confirmation.