Hazard rate

The instantaneous rate of default conditional on survival so far. It links a constant default intensity to the survival probability.

Where you will meet it

Hazard rate comes up in 15 learning outcome notes across the FRM syllabus. A few of them:

• External and Internal Credit Ratings
  FRM Part I · Valuation and risk models

  “The hazard rate, λ, is the instantaneous default intensity.”

• Country Risk: Determinants, Measures, and Implications
  FRM Part II · Credit risk measurement and management

  “Assume a constant hazard rate h, and let Pcum be the cumulative probability of default over T years.”

• Financial Correlation Modeling: Bottom-Up Approaches
  FRM Part II · Market risk measurement and management

  “With a constant hazard rate λ, the default time of name i is written Time.”

• External and Internal Credit Ratings
  FRM Part I · Valuation and risk models

  “The hazard rate is close to: Hazard = spread ÷ (1 − R).”

See also

Survival probability

All terms beginning with H · FRM glossary

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