Weighted Average Life

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Weighted Average Life is used to measure credit risk.

Although the terms WAFM and WAL are sometimes used interchangeably with respect to money market funds, the WAL is technically the weighted average of the times when principal is repaid.

Instruments which repay principal over several years will have a shorter WAL than those which repay all of the principal at maturity.

Weighted Average Life can be applied both to portfolios of investments and to single investments.

See also