Default Intensity

Default intensity is a financial measure that indicates the instantaneous risk of a borrower failing to meet their debt obligations at any given moment. Think of it as the real-time likelihood per unit time that a loan or bond will default. It helps investors assess how quickly the risk of default is changing, allowing for better pricing of credit risk. Higher default intensity implies a greater immediate chance of default, while lower intensity suggests a lower risk. It is used in credit risk modeling to quantify and manage the likelihood of a borrower not honoring their commitments.