If there's a risk of default somewhere in the world, you can bet there's a credit default swap that will be actively traded. When it comes to the Greek drama, the index of choice was the Markit iTraxx SovX index (Markit news). Granted it was created to enable CDS activity, but it would be hard to blame Markit for the anxiety around Greek bonds. It's hardly a surprise that CDS prices have been bid up and that there has been heavy investment bank activity (investment bank news).

The New York Times weighs in with a look that begs some big questions. First, you have to wonder about who's playing the house. Lots of firms rushed in to buy CDS protection, but who has the other side of the trade. I am not sure beyond stating that it is not AIG (AIG). Also, are we really near a default event? I doubt the volume on the SovX index was nearly what it was on all those CDSs on mortgage-related  CDOs. But still, the same dynamic could play out. There's always a loser; someone has to pay the winners.

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