This paper applies a structural credit risk framework to extract market-implied delinquency probabilities for U.S. sovereign debt from credit default swap spreads. Findings have implications for debt-ceiling negotiations and for institutional investors assessing tail risks in nominally risk-free benchmarks.
Research · Sustainable Finance
CDS-Implied Risk of U.S. Delinquency: Implications for the U.S. Debt Ceiling
A structural credit risk approach to extracting market-implied probabilities of U.S. sovereign delinquency from credit default swap pricing.
Bruno G. Kamdem
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September 1, 2021
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Journal article
Full Citation
Chen, R.-R., Finnerty, J. D., & Kamdem, B. G. (2021). CDS-Implied Risk of U.S. Delinquency: Implications for the U.S. Debt Ceiling. The Journal of Fixed Income, 31(1), 6–26. DOI: 10.3905/jfi.2021.1.114
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