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Average Life

Explore commonly used personal finance terms.

Average life, or weighted average life, is a measure of the time until half of the principal of a loan or bond is expected to be repaid. This metric is used in fixed-income investments to assess repayment risk and interest rate exposure. A shorter average life implies faster principal repayment, which reduces credit risk and interest costs over time. Investors and analysts use average life to evaluate the risk and liquidity profile of debt securities, particularly for mortgage-backed and asset-backed securities.

Other glossary terms

Abandonment Value

Value of an asset if liquidated or abandoned

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Abatement

Reduction or exemption of taxes or fees

A

Absolute Advantage

Ability to produce goods at a lower cost

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Absolute Assignment

Permanent transfer of ownership rights

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Absolute Priority Rule

Debt repayment rule in bankruptcy

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Absolute Return

Investment performance measured independently of benchmarks

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Absolute Value

Measure of an asset’s worth without context

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Accelerated Cost Recovery

Faster cost recovery through depreciation methods

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Accelerated Cost Recovery System (ACRS)

Depreciation method for tax purposes

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Accelerated Depreciation

Faster depreciation method to reduce taxable income

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Accelerated Vesting

Faster schedule for obtaining full ownership of benefits

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Acceleration Clause

Provision to speed up debt repayment

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Acceleration of Benefits

Early payout of insurance benefits

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Account Aggregation

Consolidation of financial accounts in one place

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Account Analysis

Review of account activity to determine fees and service levels

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Account Balance

Current amount in an account

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Account Freeze

Restriction on account access

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Account Freeze Notification

Notice informing account holders of restricted access

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Account Reconciliation

Process of matching account records to identify discrepancies

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Account Reconciliation Statement

Statement used to ensure accuracy in accounts

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