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. Credit & Loans

    Understanding The Mortgage Payment Structure

  2. Bonds & Fixed Income

    What determines the price of a bond ...

  3. Bonds & Fixed Income

    How long will it take for a bond to ...

  4. Taxes

    Why should I keep records on my tax-exempt ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center