What is a weighted average maturity?
Dear average maturity is the term most commonly used on a mortgage supported by securities that are a type of derivative investment composed of many individual mortgages. The calculation based on the combined value of all mortgages in the area of safety and time to maturity or time to the final payout for each mortgage brings weighted average maturity. The higher the value resulting from the weighted average calculation of maturity, the longer the asset, which is security under it, until the final payout.
Calculation of weighted average maturity of the investment begins with the total value of all assets that include security. The value of each asset is then divided by the total value of all assets; This result is multiplied by the years that remain to the maturity of the individual asset. This step is then repeated for each individual asset in the portfolio. Association of results for each asset provides an average weighted maturity of security.
In mathematical calculations, the term 'weight' concerns relaysAtrial importance of one number for others. The division of the value of one individual asset in the portfolio by the total value of all assets in the portfolio brings the weight of the individual asset in relation to the overall portfolio. The weighted diameter is a step further by calculating the overall relative importance of all assets in the portfolio.
For those who evaluate safety, weighted average maturity does not offer any view of the quality of either individual investment that secure or cumulative quality of assets. This number provides a one -time description of how long the asset will continue to generate if the basic assets remain healthy. Review weighted average maturity over time can provide an even clearer picture of the long -term safety time of payout, assuming that it is assumed under the assets that are below it.
term weighted average maturity is also applied to the calculation used to throwDisposition of binding. This calculation calls the duration of Macaulay and named for the economist Frederick Macaulaye, is designed to help the risk of changing interest rates on the value of the bond. Macaulay found that non -derived averages were not useful in attempting to predict these risks. Its duration of the bonds monitors the cash flow of a bond with a return to maturity, multiplies it by then into cash flow and distributes it by the bond price.