The Zeta Model is a financial analysis technique used to evaluate the credit risk of a portfolio of corporate bonds. It was developed by Edward Altman, a finance professor at New York University. The model calculates the probability of default for each bond in the portfolio and aggregates these probabilities to determine the overall credit risk of the portfolio.

The Zeta Model uses a statistical approach to determine the relationship between financial ratios and default rates. Altman identified five key financial ratios that were significant predictors of default: working capital/total assets, retained earnings/total assets, earnings before interest and taxes (EBIT)/total assets, market value of equity/book value of total liabilities, and sales/total assets. These ratios are used to calculate a Z-score for each bond in the portfolio.

The Z-score is a measure of credit risk that takes into account a company's profitability, liquidity, solvency, and market valuation. A high Z-score indicates a low probability of default, while a low Z-score indicates a high probability of default. The Z-scores are then converted into probabilities of default using a statistical formula.

The Zeta Model is a useful tool for portfolio managers, credit analysts, and investors who want to assess the credit risk of a portfolio of corporate bonds. By using the Zeta Model, they can identify bonds that are likely to default and adjust their portfolios accordingly to manage their risk exposure.