Average Effective Maturity
 |
Definition of 'Average Effective Maturity '
For a single bond, it is a measure of maturity that takes into account the possibility that a bond might be called back to the issuer.
For a portfolio of bonds, average effective maturity is the weighted average of the maturities of the underlying bonds. The measure is computed by weighing each bond's maturity by its market value with respect to the portfolio and the likelihood of any of the bonds being called. In a pool of mortgages, this would also account for the likelihood of prepayments on the mortgages.
|
 |
Investopedia explains 'Average Effective Maturity '
This measure is a more accurate way to get a feel for the exposure of a single bond or portfolio. Particularly in the case of a portfolio of bonds or other debt, a simple average could be a very misleading measure. Knowing the average maturity of the portfolio is essential to knowing the interest rate risks faced by that portfolio.
|
-
Investing in bonds - What are they, and do they belong in your portfolio?
Read More »
-
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
Read More »
-
Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
Read More »
-
-
Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
Read More »
-
If you want a diversified portfolio and steady cash flow, check out this fixed-income strategy.
Read More »
-
If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
Read More »
-
Read More »
|
|
