The subprime mortgage and financial crisis has shaken the foundations of the financial industry by causing the failure of many iconic Wall Street investment banks and several prominent depository institutions. This crisis has stymied credit extension to households and businesses thus creating credit crunches and, ultimately, a global recession. This text describes some of the most important aspects of the subprime mortgage crisis (SMC) such as residential mortgage loan (RML) extension, RML securitisation, subprime risks, bank bailouts as well as Basel capital regulation in a stochastic...