| name | parallax-credit-lens |
| description | "Credit risk assessment for publicly traded companies: leverage, coverage, liquidity, solvency (Palepu), Altman Z-score, and credit health signals vs. peer medians. Symbol in RIC format (AAPL.O, JPM.N). NOT for portfolio credit risk (use /parallax-scenario-analysis), not for private companies (use /parallax-credit-risk when available)." |
Credit Lens
Credit risk assessment for publicly traded companies using Parallax MCP tools.
Usage
/parallax-credit-lens AAPL.O
/parallax-credit-lens JPM.N
/parallax-credit-lens 0001.HK "Hong Kong banking"
Workflow
Execute using mcp__claude_ai_Parallax__* tools. JIT-load _parallax/parallax-conventions.md for RIC resolution, batch patterns, and fallback behaviors.
Batch 0 — Validation
- Verify input symbol is in RIC format (ticker.exchange). If plain ticker provided (AAPL), resolve to RIC using parallax-conventions.md suffix table (→ AAPL.O).
- Call
ToolSearch with query "+Parallax" to load MCP tool schemas before first mcp__claude_ai_Parallax__* call.
Batch A — Core financials (parallel, 4 tokens)
Fire all 4 calls simultaneously:
get_financials(symbol=<RIC>, statement="balance_sheet") # Total debt, equity, total assets
get_financials(symbol=<RIC>, statement="cash_flow") # Operating CF, Capex, FCF
get_financials(symbol=<RIC>, statement="ratios") # D/E, D/EBITDA, Interest Cov, margins, peer medians
get_peer_snapshot(symbol=<RIC>) # D/E peer median, factor scores
Extract from these calls:
- Leverage: Debt/EBITDA, Debt/Equity, Debt/Assets (compare to peer medians from
ratios and peer_snapshot)
- Coverage: Interest Coverage Ratio, EBITDA/Interest (from
ratios)
- Liquidity: Current Ratio, Quick Ratio (from
balance_sheet + ratios)
- Profitability: EBITDA Margin, EBIT Margin, FCF Margin (from
ratios)
Batch B — Solvency, trend, macro (parallel, 6 tokens, async)
Fire all 3 calls simultaneously. Note: get_financial_analysis is async (2-5 min) and should not block the workflow — execute in parallel.
get_financial_analysis(symbol=<RIC>) # Palepu solvency assessment (5 tokens, async)
get_score_analysis(symbol=<RIC>) # Quality score 52-week trajectory
get_telemetry() # Market regime tag (no symbol parameter)
From these:
- Solvency (Palepu): accruals quality, profitability, liquidity, leverage solvency assessment
- Quality Trend: 52-week Quality factor score change (deterioration is a red flag)
- Macro Regime: current market regime context for credit environment
Altman Z-Score Computation
Compute market-cap-based Altman Z-score (public company variant) from Batch A + publicly available market cap:
Z = 1.2×X1 + 1.4×X2 + 3.3×X3 + 0.6×X4 + 1.0×X5
where:
X1 = Working Capital / Total Assets
X2 = Retained Earnings / Total Assets
X3 = EBIT / Total Assets
X4 = Market Cap / Total Liabilities ← use closing market cap from latest trading data
X5 = Revenue / Total Assets
Thresholds:
Z > 2.99 → Safe Zone (low distress probability)
1.81–2.99 → Grey Zone (moderate risk)
Z < 1.81 → Distress Zone (high distress probability)
If market cap unavailable, compute with book equity instead (Z' variant) and note the substitution.
Flagging Logic
For each metric, compare against peer median and peer 75th percentile:
| Signal | Condition |
|---|
| 🟢 GREEN | Better than peer median |
| 🟡 AMBER | Between peer median and 75th percentile |
| 🔴 RED | Worse than peer 75th percentile |
Also apply absolute credit thresholds (use the more conservative of peer-relative and absolute):
| Metric | Amber | Red |
|---|
| Debt/EBITDA | > 3.5x | > 5.0x |
| Interest Coverage | < 3.0x | < 1.5x |
| Current Ratio | < 1.2x | < 1.0x |
| Altman Z | Grey zone (1.81–2.99) | Distress zone (< 1.81) |
| Quality Score Change | > –5 pts | > –15 pts (52w) |
Quality score deterioration is a primary credit health warning signal.
Output Format
Structure output in markdown with the following sections:
1. Header (1 line)
## Credit Risk Assessment: [Company] ([RIC]) | Traffic-Light: 🟢/🟡/🔴
Overall traffic-light determined by: count of RED flags (→ Red), count of AMBER flags (→ Amber), count of GREEN (→ Green). Majority color wins.
2. Metrics Dashboard (table)
| Category | Signal | Metric Value | Peer Median | Interpretation |
|---------------|--------|--------------|-------------|-----------------|
| Leverage | 🔴 RED | D/E 2.1x | Peer 1.2x | 75% above peer |
| Coverage | 🟢 GREEN| Int Cov 5.2x | Peer 3.1x | Top quartile |
| Liquidity | 🟡 AMBER| Curr Ratio 1.3x | Peer 1.8x | Below median |
| Profitability | 🟢 GREEN| EBITDA Margin 28% | Peer 22% | Above peer |
| Altman Z | 🟡 AMBER| Z = 2.1 | — | Grey Zone |
| Quality Trend | 🔴 RED | –14 pts (52w) | — | Deteriorating |
3. Solvency Assessment (narrative)
Output the Palepu solvency section from get_financial_analysis. If unavailable, note: [Solvency assessment unavailable — tool error].
4. Key Flags (bulleted list)
List every RED and AMBER flag with one-line explanation:
- 🔴 RED: Debt/EBITDA 5.2x exceeds peer 75th percentile (3.8x) and absolute threshold (5.0x)
- 🟡 AMBER: Quality score down 14 pts over 52 weeks — monitor for further deterioration
- 🔴 RED: Interest Coverage 2.1x below absolute threshold (3.0x); limited debt service cushion
5. Quality Trend (one sentence)
[Quality score 52-week trajectory + interpretation from get_score_analysis]
Example: "Quality score deteriorated 14 points over the past 52 weeks, signaling a potential credit health decline."
6. Macro Context (one sentence)
[Market regime from get_telemetry + one sentence on credit implication]
Example: "Current market regime is recessionary — a challenging environment for credit quality; elevated default risk across all sectors."
7. Footer
*Analytical output based on Parallax factor scores and public financial data. Not investment or credit advice.*
Error Handling
- Symbol not found: Return error message with suggestion to check RIC format.
- get_financial_analysis fails (async timeout or error): Continue with remaining metrics; append
[Solvency assessment unavailable] to output.
- Peer median unavailable (peer group too small): Degrade gracefully — show absolute thresholds only, note peer comparison unavailable.
- Market cap unavailable (Altman X4): Compute Z' (book equity variant) and note substitution in Altman section.
Gotchas & Callouts
- Quality score is a credit proxy: A deteriorating Quality score (especially >10 pts decline) is an early warning of credit stress and should be flagged as RED even if other metrics are healthy.
- Altman Z thresholds shift by industry: Manufacturing thresholds may differ from retail/financial. The fixed thresholds are generic — note industry caveats in output if appropriate.
- Peer comparisons assume comparable size/structure: A mega-cap's peer medians may not be relevant to an analyst evaluating a small-cap. Call this out if significant size mismatch is detected.
- Palepu solvency assessment includes accruals quality: High accruals (earnings not backed by cash) is a red flag independent of traditional credit metrics.
