Marco Folpmers on Time columnist Justin Fox`s reappraisal of modern economic history.

What steps must a financial institution take to comply with Basel II requirements for economic capital (EC)? And how do EAD, PD and LGD factor into the determination of EC credit risk? Dr. Marco Folpmers answers these questions and offers a practical approach for calculating EC for residential mortgages.

What steps can a firm take to compute economic capital (EC) for a corporate loan portfolio? How can EC be allocated to the loan level and how should loss distribution be specified? Dr.Marco Folpmers and Peter de Rijke describe how EC can be quantified and explain how it can be ... click here for more details.

A recent study by Fitch Ratings found that, during periods of market stress, defaults tend to cluster, asset correlations increase and loss rates exceed historical means. But what is the real connection between economic downturn conditions and asset correlations? Dr. Marco Folpmers and Peter de Rijke break down the market ... click here for more details.

While many US mortgage owners are feeling the weight of the subprime-driven credit crisis, consumers in Western Europe are now inhibited by penalties tied to prepayment of mortgage loans. Dr. Marco Folpmers identifies the barriers to prepayment of mortgage loans, outlines an optimal prepayment strategy for callable mortgage loans and ... click here for more details.

The Public-Private Investment Program for relieving U.S. banks of their toxic assets makes lofty promises but will have difficulty delivering on all of them, writes Marco Folpmers of Capgemini Consulting.

Assessing the risks of a collateralized debt obligation (CDO) is a significant challenge. Multiple factors, including the market value and value-at-risk of a CDO, must be taken into account. Dr. Marco Folpmers examines the risks of structured products, identifies the differences between a single-tranche and multi-tranched CDO and explains how ... click here for more details.

It is difficult to validate loss-given default (LGD), particularly in the case of low-default portfolios. This is partly because the data required for such validation are relatively scarce. Dr. Marco Folpmers identifies the challenges that LGD estimation and validation present and explains how these obstacles can be overcome with the ... click here for more details.

How can a firm use principal component analysis to calculate analystical VaR for interest rate risk?

Under Basel II, it is tricky to compute exposure for securities financing transactions (SFTs), bank-supplied loans that are secured by stock collateral. Dr.Marco Folpmers breaks down the DNA of SFTs and explains how to calculate counterparty credit risk and expected positive exposure for these loans.