Cumulative Default Rate
Corporate Credit Analysis glossary · Credit Metrics & Debt Schedule Modeling
Definition
The probability of default at any time within a specified horizon. Distinct from the marginal (period-specific) default rate; the cumulative rate is the integral of marginal rates over the horizon.
Cumulative Default Rate in plain English
Imagine asking, "What are the odds this borrower goes broke at some point in the next five years?" That total odds-over-the-whole-window number is the cumulative default rate — the chance of failing to pay at ANY moment before the deadline. It's different from the marginal rate, which is the risk in one single slice of time (say, just year 3). Think of a road trip: your chance of getting a flat tire on this specific mile is small (marginal), but your chance of getting one somewhere over the whole 500-mile trip (cumulative) is much bigger because you add up the risk from every mile.
Learn these first
Related Corporate Credit Analysis terms
Corporate Credit Analysis practice questions · Corporate Credit Analysis flashcards · Corporate Credit Analysis study guide