Haircut

Thing is that the CDS instruments insuring Greek debt holdings probably don't. Just like AIG's mortgage-backed security CDSes didn't actually insure against the losses, because there wasn't enough money to deal with a market collapse.

As part of Greece’s restructuring, bondholders will be required to take a 70 percent loss on their holdings. When first announced, the deal was proposed as a voluntary exchange, which would not have activated the credit-default swaps.

No default here!