The rule of the game may be caveat emptor but investors the world over have been nursing losses from all sorts of investment products over the last year or so. It is not just the wealthy investors in the Madoff fraud that have wounds to treat.

Structured products guaranteed by Lehman Brothers have collapsed and many investors in various yield enhancement structures such as reverse convertibles or accumulator structures have been left holding discounted stock. It seems that many investors have precious little idea of the risks of the financial products in which they invest.

The European Structured Investment Products Association has recently launched a segmentation tool which it refers to as its “Derivative Map”. The new tool offers a visual representation of the various structured producst in numeric terms and by giving graphics of the products’ payout profiles.

EUSIPA adopted the basic system in February this year. The initial selection is between investment products and leverage products. At a second level, the former are segmented into capital protected products, yield-enhancement products and participation products.

“There is a lot of talk about structured products being too complex to comprehend,” EUSIPA’s president Reinhard Bellet said.

“Our Derivative Map provides market participants including private investors with a valuable tool to assess all variations. Standardisation of terms will be key for comparability and the acceptance of our products. We also plan to publish European market statistics in accordance with the EUSIPA system.”

The map is based on the Swiss Structured Product Association’s categorisation of structured products, which has been well received in the market according to EUSIPA.

The Derivative Map can be accessed here.