Could you predict the next Amaranth? A small but growing number of structured products allow super-rich investors to bet against a hedge fund implosion as part of efforts by investment banks to reduce their exposure to extreme events in the sector.

The products, typically called stability notes but also known as market default obligations, allow the banks to pass on risks they are taking from the rapid expansion of demand for geared or capital guaranteed products linked to hedge funds. The risks are serious, but highly unlikely to occur. Rather like insurance for natural disasters, investors are unlikely to lose. But if they do lose, they lose everything.