  We theorize the financial health of a company and the risk of its default. A
company is financially healthy as long as its equilibrium in the financial
system is maintained, which depends on the cost attributable to the probability
that equilibrium may decay. The estimate of that probability is based on the
credibility and uncertainty of the company's financial forecasts. Accordingly,
we develop an equilibrium model establishing ranges of interest rates as a
function of predictable corporate performance and of its credit supply
conditions. As a result, our model estimates idiosyncratic default risk and
provides intrinsically forward-looking PD.
