Weighted average maturity

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Weighted average maturity

The weighted average maturity of an MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date issue, using as the weighting factor the balance of each of the mortgages as of the issue date.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Weighted Average Maturity

The average amount of time remaining before maturity in the mortgages underlying a mortgage-backed security, weighted by the percentage of the MBS that each mortgage constitutes. For example, suppose a mortgage-backed security contains two mortgages, one worth $10,000 and one worth $20,000, for a total of $30,000. The $10,000 mortgage matures in five years, and the $20,000 mortgage in 10 years. The weighted average remaining maturity is calculated as:

WAM = ($10,000 / $30,000) * 5 years + ($20,000 / $30,000) * 10 years = 8 1/3 years

The weighted average maturity is also known as the weighted average remaining maturity.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The reviewed MMFs seek to limit interest rate and spread risk by maintaining their weighted average maturities (WAM) and weighted average lives (WAL) below 60 days and 120 days, respectively.
Kingspan also announces that it has negotiated EUR 127.5m private placement loan notes with weighted average maturities of eight years.
The three new short duration bond funds are managed with varying degrees of credit and interest rate exposure, from primarily investment grade to below investment grade and with weighted average maturities between six months to five years.

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