Benzoni, Luca; Cabanilla, Christian; Cocco, Alessandro; … - 2023
As the debt ceiling episode unfolds, we highlight a sharp increase in activity across the U.S. credit default swaps … (CDS) market and infer the likelihood of a U.S. default from these market prices. Beginning in January 2023, we document a … in the market-implied default probability from about 0.2-0.3% in 2022, to approximately 1% in 2023. Yet, this default …