RT Journal Article SR Electronic T1 Modeling the Dynamics of MBS Spreads JF The Journal of Fixed Income FD Institutional Investor Journals SP 43 OP 49 DO 10.3905/jfi.2002.319323 VO 12 IS 2 A1 Gregory Koutmos YR 2002 UL https://pm-research.com/content/12/2/43.abstract AB This article investigates the dynamics of mean reversion and volatility in mortgage-backed security spreads, the yield spreads between conventional 30-year mortgages and Treasury securities. The findings indicate that changes in MBS spreads follow in all instances asymmetric mean-reverting processes. They exhibit non-stationary behavior following spread increases, but they are strongly mean-reverting following spread decreases. The mean-reverting component is statistically and economically stronger, thus offsetting non-stationarity. Volatility is time-varying, depending on past innovations, past volatility estimates, and the level of past spreads. Its behavior is asymmetric, rising more in response to positive innovations.