MBS-WAM

[YAhmed]

wam = weighted average maturity
whats the difference between wam and weighted average life.
thx

 

[idreesz]

WAM is an average across several loans, and applied to pools of mortgages
while
WAL is an average of a single amortizing loan or amortizing bond

 

[kalo1]

There is an equation in CFAI for that - do we need to know how to calc WAM, WAL?

 

[YAhmed]

so can i say WAM is broad catalog and WAL is inside WAM?

 

[freakingout]

idreesz Wrote:
——————————————————-
> WAM is an average across several loans, and
> applied to pools of mortgages
>
> while
>
> WAL is an average of a single amortizing loan or
> amortizing bond
Sorry but I still don’t understand. There’s an EOC question on this at page 425, here the security B has an average life of 11.5 years and WAM of 136 months, I understand the WAM but what is the underlying meaning behind the 11.5 years, how to calculate that? Thanks!

 

[kurupt1]

im not sure here but i believe life refers to when a mortgage should complete payments, and maturity is when the mortgage is assumed to finish based on prepayment rates.

 

[ro424]

Other way around Kurupt1.
WAM is based on the actual maturity dates of the loans
WAL is based upon the time that both scheduled and unscheduled principal payments are made

 

[bpdulog]

kurupt1 Wrote:
——————————————————-
> im not sure here but i believe life refers to when
> a mortgage should complete payments, and maturity
> is when the mortgage is assumed to finish based on
> prepayment rates.
You have it backwards. Maturity is the stated maturity of the loan and the life is based on prepayments.