%0 Journal Article %A Stavros Peristiani %T Modeling the Instability of Mortgage-Backed Prepayments %D 2003 %R 10.3905/jfi.2003.319358 %J The Journal of Fixed Income %P 33-41 %V 13 %N 3 %X Prepayment plays a critical role in the valuation and performance of mortgage-backed securities. For this reason, market participants have devoted substantial resources to developing formal mathematical models of mortgage prepayment. The author demonstrates that the prepayment function is non-linear and heteroscedastic; prepayments are increasingly more volatile at higher interest rate spreads. The analysis suggests that these unusual properties of pool prepayments are the result of statistical aggregation. %U https://jfi.pm-research.com/content/iijfixinc/13/3/33.full.pdf