Probability Of Default Calculator

Work out probability of default instantly with clear inputs, formula shown and shareable results.

About Probability Of Default Calculator

A one-year default probability is estimated from observed defaults over obligors, then annualised for the observation window. Compounding survival across years gives the cumulative default probability, which is what matters for long-dated exposures.

Formula

Default probability

Annual PD = 1 - (1 - observed rate)^(1/years); cumulative = 1 - (1 - annual PD)^horizon

Worked example

With the default values below, Probability Of Default Calculator returns Annualised Probability Of Default of 2.8333%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Number Of Obligorsaccepts 1–10,000,000: 2,400
Defaults Observedaccepts 0–10,000,000: 68
Observation Period In Yearsaccepts 0.25–20: 1
Horizon To Projectaccepts 1–20: 3

Results

Annualised Probability Of Default: 2.8333%
Observed Default Rate: 2.8333%
Cumulative Default Probability Over The Horizon: 8.2614%
Survival Probability Over The Horizon: 91.7386%

Step by step

1Values used
2Default probability
3Annualised Probability Of Default= 2.8333
4Observed Default Rate= 2.8333
5Cumulative Default Probability Over The Horizon= 8.2614
6Survival Probability Over The Horizon= 91.7386

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation or fees or charges into account.
Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.

Frequently Asked Questions

Why compound survival rather than multiply the default rate?

Because a borrower can only default once. Survival compounds; default probabilities do not simply add.

Is a through-the-cycle estimate better?

For provisioning yes — a single benign year understates default risk badly.