Meaning
Time-to-event functions calculate the likelihood that a subject or asset remains in a specific state beyond a given temporal threshold. In the context of a startup, survival probability measures the chance that a customer will not churn or that a company will not run out of capital within a year. This figure is derived from the cumulative hazard experienced over time.
It stops being relevant once the event of interest has occurred.
Hazard Rate
Instantaneous risk of an event determines the slope of the probability curve. As survival probability declines, the hazard rate shows the intensity of the pressure at each moment. This rate can be constant or changing.
Identifying the period of peak hazard allows for targeted intervention.
Temporal Decay
Passage of time naturally reduces the number of survivors in a cohort. In a survival probability model, this decay follows a mathematical decay function like the exponential or Weibull distribution. The rate of decay indicates the long-term viability of the group.
Stable systems show a flattening curve over time.
Exit Threshold
Boundary conditions define when a subject is removed from the calculation. When the survival probability reaches zero, the event is certain to have happened. This threshold is often used to set the duration of a contract or a warranty.
It provides a hard limit for planning and resource allocation. Calculated values at this stage help in determining the necessary insurance premiums or reserve funds.
