Weighted average coupon (WAC)
Asset-Backed Securities glossary · Collateral & Cash Flow Modeling
Definition
The principal-weighted average interest rate across the underlying receivables.
Weighted average coupon (WAC) in plain English
When a deal is built from many loans, each one charges the borrower a different interest rate. The weighted average coupon is the deal's overall interest rate, but with a fair twist: bigger loans count more toward the average than tiny ones. So a large $500,000 loan pulls the average toward its rate far more than a small $5,000 loan does. It's like figuring out a class's average height but giving more weight to... actually, simpler: it's the blended rate the whole pool earns, tilted toward wherever the biggest dollars are.
Also called: WAC
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