Fixed income - Weaknesses of reduced form models - hazard rate estimation

CFA Level II
#1

Weaknesses of reduced form models:

Unless the model has been formulated and backtested properly, the hazard rate estimation procedures may not be valid.

What does hazard rate estimation procedures mean. Thanks.

#2

Hazard rate is simply another name for ‘conditional probability of default’ . So in this case I assmue that it means that the probability results are unreliable.

#3

Thanks!

This approach is easier to understand. Many thanks.