• The relative likelihood of a particular outcome among all possible outcomes.

• The chance that a given outcome will occur.

 Embedded terms in definition
 Referenced Terms
 Bankruptcy prediction models: Bankruptcy Prediction Models refer to the quantitative models that estimate the Probability of bankruptcy for a given firm or a bank.

 Bar chart: The simplest type of Probability distribution; shows only a limited number of outcomes and associated probabilities for a given event.

 Base probability of loss: The Probability of not achieving a portfolio expected return.

 Bond rating: Denotes the safety of the bonds. Probability of default generally increases as the bond ratings decline. Bottom falls out as we go to below investment grade bonds. The highest bond rating is AAA followed by AA, A, and BBB. The lowest investment quality bond rating is BBB. All ratings below BBB are junk bonds. These are BB, B, and CCC. D denotes bonds that have already defaulted.An evaluation of the possibility of default by a bond issuer, based on an analysis of the issuer's financial condition and profit potential. Bond rating services are provided by, among others, Standard & Poor's 500, Moody's Investors Service and Fitch Investors Service.

 Coinsurance effect: Refers to the fact that the merger of two firms decreases the Probability of default on either firm's debt.

 Related Terms
 Base probability of loss
Continuous probability distribution
Cumulative probability distribution
Normal probability distribution
Probability density function
Probability distribution
Probability function

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