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.
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.
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