Weighted Average Maturity - WAM

AAA

DEFINITION of 'Weighted Average Maturity - WAM'

The weighted average of the time until all maturities on mortgages in a mortgage-backed security (MBS). The higher the weighted average to maturity, the longer the mortgages in the security have until maturity. Also known as "average effective maturity".

INVESTOPEDIA EXPLAINS 'Weighted Average Maturity - WAM'

The measure is calculated by totaling each mortgage value represented by the MBS. The weights of each mortgage is found by dividing the value of each into the total of all. To arrive at the WAM number the weight of each security is multiplied by the time until maturity of each mortgage, and then all the values are added together. For example say an MBS has three mortgages valued at $1,000, $2,000 and $3,000 (a total of $6,000) and mature in one, two and three years respectively. The weights of these are 1/6 (1,000/6,000), 1/3 (2,000/6,000) and 1/2 (3,000/6,000). The WAM is 2 1/3 years (1/6 x 1 year + 1/3 x 2 years + 1/2 x 3 years).

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Weighted Average Remaining Term ...

    The remaining life of an asset-backed security or a mortgage-backed ...
  3. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal ...
  4. Weighted Average Loan Age - WALA

    A dollar-weighted average measuring the age of the individual ...
  5. Commercial Mortgage-Backed Securities ...

    A type of mortgage-backed security that is secured by the loan ...
  6. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
Related Articles
  1. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

  2. What You Need To Know About Preferred ...
    Trading Strategies

    What You Need To Know About Preferred ...

  3. Understanding The Bond Behemoth That ...
    Mutual Funds & ETFs

    Understanding The Bond Behemoth That ...

  4. Fund Firm Jolts: Pimco's Isn't The First ...
    Investing News

    Fund Firm Jolts: Pimco's Isn't The First ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center