Difference between revisions of "Mortgage Instrument Weighted Average Remaining Maturity"

Latest revision as of 15:48, 10 March 2022

Definition

Mortgage Instrument Weighted Average Remaining Maturity. 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.

Issues and Challenges

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.

Disclaimer

This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.

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 == Definition ==
 '''Mortgage Instrument Weighted Average Remaining Maturity'''. 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.
 == Issues and Challenges ==
-Synonym (if this is the same term): 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). Analysis: this investopedia decription does not take account of there being more than one Pool behind the MBS.
+* 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.
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