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

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.

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.


This approach is easier to understand. Many thanks.