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Thursday, October 11, 2012

Meaning of underwriting

Term of the Day 

Underwriting

The underwriter (normally known as investment banker ) brings a new security issue to the investors in an offering. In this case, the underwriter guarantees a certain price for a certain number of securities to the party that is issuing the security (in exchange for a fee). Thus, the issuer feels secured that they will raise a certain minimum from the issue, while the underwriter bears the risk of the issue.
Thus it is the process of insuring someone or something.
The process by which a lender decides whether a potential creditor is creditworthy and should receive a loan.

1 comment:

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