Benzoni, Luca; Wernick, Marisa - 2025 - This draft: May 27, 2025
We examine the 2025 U.S. debt limit episode through the lens of financial markets. First, we document an increase in trading activity in the U.S. sovereign CDS market, and we infer a probability of default from CDS premiums. We find that default risk reached 1% by the November 6 Presidential...