Default probability

Default probability refers to the likelihood that a borrower, such as an individual or a company, will fail to meet their debt obligations, meaning they won't be able to make interest or principal payments on time. This probability is often assessed by credit rating agencies and financial institutions to evaluate the risk associated with lending money. A higher default probability indicates a greater risk of non-payment, which can affect the interest rates offered on loans and the overall financial health of lenders and the economy.