Weighted Average Life (WAL) represents a financial measurement that accounts for the average duration required for the principal amount of a loan, bond, or mortgage-backed security to be completely repaid. While the maturity identifies the date of the last payment, WAL takes into account all the scheduled principal repayments and their timing. Each payment is weighted according to the principal amount repaid at that specific time. From an investor's standpoint, WAL is a handy tool to gauge the risk of repayment, the point of time for receiving cash flows, and exposure to interest rates. A small WAL would signify that the investor would be able to recover the principal faster whereas a large WAL suggests that the investor's funds will remain invested for a longer time.
