Underwriting

What does it mean?
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).

2. The process of issuing insurance policies.

In Other Words...
The word "underwriter" is said to have came from the practice of having each risk taker write his name under the total amount of risk that he was willing to accept at a specified premium. In a way, this is still true today, as new issues are usually brought to market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling their specific allotment.

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Related Terms
Competitive Bid | Eating Stock | Greenshoe Option | Investment Bank | IPO | Life Insurance | Negotiated Underwriting | Public Offering Price (POP) | Takedown

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