An unstressed PD is an estimate that the obligor will default over a particular time horizon considering the current macroeconomic as well as obligor specific information. This implies that if the macroeconomic conditions deteriorate, the PD of an obligor will tend to increase while it will tend to decrease if economic conditions improve.

A stressed PD is an estimate that the obligor will default over a particular time horizon considering the current obligor specific information, but considering "stressed" macroeconomic factors irrespective