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Distressed European Equities, Bonds a Great Buy: Pro

Europe's debt crisis has pushed yields on bonds of peripheral countries to record levels and sent shares of some banks tumbling. Greek 10-year bonds, for example, are trading at distressed levels, offering investors a yield of 17.4 percent.

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But one expert who advises institutional investors on risk and hedging strategies says peripheral long-end bonds and some bank stocks offer investors a great investment opportunity.

"If you invest, take opportunities, hedge against a problem or a blowup, and you do it as an alpha strategy, [it] allows you to have great opportunities and this is a great market to invest in," Ari Bergmann, managing principal at Penso Advisors told CNBC on Thursday.

Bergmann's hedging strategy involves shorting 10-year German government bonds, which he says are bound to fall if Europe's leaders agree on a new bailout at the emergency summit that gets under way on Thursday. Such a bailout, says Bergmann, would force Germany and the core of Europe to pay for Greece, which in turn, would lower yields on peripheral debt and push up yields on German government bonds.

"If you look at 10-year swap rates in Europe right now, they're around 3 and a quarter," Bergmann said. "They can go substantially higher because inflation and/or debt will have to go higher to pay for the periphery."

Bergmann also recommends investors go long on some of Europe's banks, such as the National Bank of Greece. U.S.-listed shares of the lender have fallen 56 percent over the last year and trade at just $1.28 on the New York Stock Exchange as of Thursday.

"It trades like an option, if something works out — and in my view it will work out — you make probably a ten bagger, a 10 multiple," Bergmann said.

He acknowledged the risk in the trade, but maintained that as long as investors bought "cheap" hedges in the bond market, distressed European equities offer a good buy.

"You could lose X or you could make 10X... so either it's dead, or if it's alive you make a multiple," Bergmann said.