Law360, New York (July 22, 2015, 11:05 AM EDT) -- As the situation in Greece illustrates vividly — just as it did almost identically three short years ago — investing in the sovereign debt of many Western European countries can be an inherently risky proposition. In light of this risk, many investors seek to hedge their sovereign debt exposure with a derivative instrument called a credit default swap, or CDS. At its most basic level (though there is nothing basic about it), a CDS is similar to insurance on a debt obligation, pursuant to which an insurance payout is made by the insurer if the debtor defaults on a "referenced" debt obligation under a defined set of circumstances called a "credit event." Thus, credit default swaps can minimize an investor's exposure to risky sovereign debt, but only to the extent that a credit event has been declared. In addition, investors utilize credit default swaps not only to hedge another investment, but as an investment in itself that provides long or short exposure to a particular debt issuance....