What is the meaning of the default intensity parameter in a reduced-form model?

What will be an ideal response?

In reduced-form models, the event in a Poisson process is defined as a default where the parameter (?) is called the intensity parameter of the Poisson process. Another name for the intensity parameter, ?, is the default intensity and it is a key parameter in the model. The default intensity at time t can be thought of in terms of a probability. More specifically, it is the conditional probability of default per unit time given that the corporation has not previously defaulted. Consequently, the Poisson process basically describes the near-term default risk of a corporation.