Parametric notes are fixed income instruments with cash flows:
　　A. determined by parametric distributions.
　　B. linked to an external risk event, such as an earthquake.
　　C. that are triggered by internal risk events, such as fraud.
　　D. linked to an index of underwriting losses.
　　Answer:B
　　All the bonds described above, except for one, are types of catastrophe bonds. Parametric notes link cash flows to the magnitude of an external risk event, such as hurricane severity in a particular region. Indemnified notes offer the issuing firm debt relief based on internal events, such as a large underwriting loss for an insurance company. Indexed notes provide cash flows related to the value of an independent index, such as a weather index or an insurance underwriting loss index. Bonds with cash flows determined by parametric distributions are quixotic.