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.