// definition
WAL
Weighted average life of principal
Short definition
The average time to principal repayment, weighted by the amount returned at each date. It is measured in years from a reference date and depends on assumptions such as prepayment speeds. It excludes interest and discounting. This repayment schedule differs from duration, which measures price sensitivity to interest rates.
risk atlas
Knowledge map
Intuition
Each dollar of principal is weighted by how long it takes to recover it.
Formula
WAL = Σ(time in years × principal repaid) / Σ(principal repaid)Related analyses
Primary sources
- Freddie Mac: STACR 2016-HQA2, weighted average lifeDefinition and assumptions for the securities’ weighted average lives.