The probability that a borrower has not defaulted by a given date. It falls over time at a rate set by the hazard rate.
Where you will meet it
Survival probability comes up in 7 learning outcome notes across the FRM syllabus.
A few of them:
Fundamentals of Probability FRM Part I · Quantitative analysis
“For a bond that has survived so far, default in a later period is conditional on that survival, so divide the unconditional probability of default in that period by the survival probability, not by one.”
External and Internal Credit Ratings FRM Part I · Valuation and risk models
“The usual mistake is to divide by the wrong survival probability, or to treat a conditional rate as if it were an unconditional one.”
Estimating Default Probabilities FRM Part II · Credit risk measurement and management
“The conditional probability divides the marginal figure by the survival probability, so Conditional = Marginal ÷ (1 − C(n−1)).”
External and Internal Credit Ratings FRM Part I · Valuation and risk models
“With a constant hazard rate, the survival probability to time t is S = e^(−λt).”
GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by Charta Learning, nor does it endorse any pass rates claimed by Charta Learning. Further, GARP is not responsible for any fees or costs paid by the user to Charta Learning. FRM® and GARP® are registered trademarks owned by the Global Association of Risk Professionals, Inc. The questions, explanations and study notes are written for this product and are not GARP curriculum material.