Weighted average life (WAL)
Asset-Backed Securities glossary · Collateral & Cash Flow Modeling
Definition
The principal-weighted average time until principal repayment, computed as the sum over time of (t × principal paid at t) divided by total principal.
Weighted average life (WAL) in plain English
Weighted average life answers a simple question: on average, how long do I wait before I get my loaned-out money back? A bond might not repay all at once — it dribbles principal back over years — so WAL is the typical wait, giving extra weight to the years when bigger chunks come back. Think of lending $1,000 to a friend who pays you back $900 next month and the last $100 five years later: because almost all of it returns fast, your 'average' wait is barely over a month, not somewhere in the middle. A short WAL means your cash comes back quickly (less risk, less time exposed); a long WAL means you're waiting.
Also called: WAL
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