Securities Underwriting
Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the process of providing access to their product like providing equity capital, insurance or credit to a customer.
In banking, underwriting is the detailed credit analysis. Underwriting can also refer to the purchase of corporate bonds, commercial paper, Government securities, municipal general obligation bonds by a commercial bank or dealer bank for its own account, or for resale to investors.
This is a way of placing a newly issued security, such as stocks or bonds, with investors. A syndicate of banks (the lead-managers), underwrite the transaction, which means they have taken on the risk of distributing the securities. Underwriters make their income from the price difference, or underwriting spread, between the price they pay the issuer and what they collect from investors or from broker-dealers who buy portions of the offering.
Underwriting services are related to capital raising services. As an underwriter, the investment bankers undertake to underwrite a specified amount of securities in an issue. The popular method, however, is for the underwriter to take the securities on its own books and sell them to investors.
For this purpose, the underwriters from a syndicate headed by the lead manager, who decides upon the division of securities and underwriting commission among various underwriters. Once the underwrites get their quota of securities, they can sell it to investors. This activity is termed as distribution.
Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the process of providing access to their product like providing equity capital, insurance or credit to a customer.
In banking, underwriting is the detailed credit analysis. Underwriting can also refer to the purchase of corporate bonds, commercial paper, Government securities, municipal general obligation bonds by a commercial bank or dealer bank for its own account, or for resale to investors.
This is a way of placing a newly issued security, such as stocks or bonds, with investors. A syndicate of banks (the lead-managers), underwrite the transaction, which means they have taken on the risk of distributing the securities. Underwriters make their income from the price difference, or underwriting spread, between the price they pay the issuer and what they collect from investors or from broker-dealers who buy portions of the offering.
Underwriting services are related to capital raising services. As an underwriter, the investment bankers undertake to underwrite a specified amount of securities in an issue. The popular method, however, is for the underwriter to take the securities on its own books and sell them to investors.
For this purpose, the underwriters from a syndicate headed by the lead manager, who decides upon the division of securities and underwriting commission among various underwriters. Once the underwrites get their quota of securities, they can sell it to investors. This activity is termed as distribution.