I actually prefer the CreditGrades calculation to the Altman Z, because it considers the historical variability of the company's stock price and assets rather than a broader based calculation, such as the Altman Z. There is also a link to CreditGrades on my site btw.
Just checking in reading over some of the posts. I'm pretty sure JP Morgan uses a Exp Weighted Moving Average on the historical returns which are lognormal distr.
They put a decaying effect of .97 on daily returns of the stock and .94 on monthly. By the time the return is 100 days old, its effect on the average is very watered down.
The most recent returns are most heavily weighted. Its most helpful as you get the most recent news and information in the asset and huge ups and downs are not locked in to the returns for long periods of time.
With that, CPN seems pretty range bound. I'm wondering if the hope for a serious uptick are long gone by now. Bottom line is they have to get a credit upgrade, and demonstrate that they will be able to no be a possible "going concern" Negotiating more long term contracts would be great, but unlikely.
Also, been thinking over that M2M jetison they did. It means that they went to earned income only, yes, but it also may mean they they have no longterm positions outside the CA contracts to mark to market and the rest is sold spot. The effect on earnings fromthe M2M is what came out of the last cc.
Something that befuddles me to no end. Highest temps in how many years are being reported and no serious uptick on natural gas?
The CreditGrades number for cummulative probability of BK in the next 5 years is 56.81%, which is not too far from what the secondary bond market is implying with bonds selling for $0.60 on the dollar.