1. 1 Corporate Default Risk: Charter Communications GSB F320 Debt Markets, February, 2007 Andreas Eckner (RA) and Darrell Duffie

2. 2 Equity Value

3. 3 Long- and Short-term Debt

4. 4 Short + ½ Long-term Debt

5. 5 Implied Total Assets

6. 6 Everything Combined

7. 7 Distance to Default

8. 8 Empirical Relationship (1980-2004): DTD and One-year Default Probability

9. 9 5yr CDS Rate

10. 10 Default Intensity (Frailty Model) Duffie, Eckner, Horel, Saita (2006) DTD t … distance to default at time t Ret t … trailing 1-year stock return r 3m,t … 3-month interest rate SnP t … trailing 1-year return of S&P 500 index Y t … frailty variable at time t

11. 11 Default Intensity (no Frailty) Duffie, Eckner, Horel, Saita (2006) DTD t … distance to default at time t Ret t … trailing 1-year stock return r 3m,t … 3-month interest rate SnP t … trailing 1-year return of S&P 500 index

12. 12 Historical Default Intensity