In reduced form default models, the instantaneous default intensity is the classical modelling object. Survival probabilities are then given by the Laplace transform of the cumulative hazard defined as the integrated intensity process. Instead, recent literature tends to specify the cumulative hazard process directly. Within this framework we present a new model class where cumulative hazards are described by self-similar additive processes, also known as Sato processes. Furthermore, we analyse specifications obtained via a simple deterministic time change of a homogeneous Levy process. While the processes in these two classes share the same average behaviour over time, the associated intensities exhibit very different properties. Concrete specifications are calibrated to data on all the single names included in the iTraxx Europe index. The performances are compared with those of the classical Cox-Ingersoll-Ross intensity and a recently proposed class of intensity models based on Ornstein-Uhlenbeck-type processes. It is shown that the time-inhomogeneous Levy models achieve comparable calibration errors with fewer parameters and with more stable parameter estimates over time. However, the calibration performance of the Sato processes and the time-change specifications are practically indistinguishable.
