Which of the following statements is NOT correct?

a.

If loans default, a pure credit swap allows the lender to cover the default loss by making a default payment that is often equal to the secondary market value of the defaulted loan minus the par value of the original loan.

b.

Under a total return credit swap, the lender can hedge an unexpected increase in the borrowers credit risk and pays a total return based on an annual fixed rate minus changes in the market value of debt.

c.

Bond for loan swap transforms less developing country (LDC) loans into marketable liquid instruments.

d.

While total return swaps can be used to hedge credit risk exposure, they contain an element of interest rate risk as well as credit risk.

e.

Debt for equity swap allows the removal of loans from the balance sheet and allows the borrowing country to retire relatively expensive hard currency loans.