Explain investment banks and securities firms, Financial Management

Assignment Help:

Investment banks and securities firms

Investment banks support corporations or governments in the issue of new debt or equity securities. Investment banking comprises

  • The underwriting, origination and placement of securities in primary financial markets that the primary and secondary markets are discussed later in this section. The method of underwriting a stock or else bond issue needs the investment bank to purchase the entire issue at a predetermined price and then to resell it in the market. The investment bank followed by it bears the risk that they aren't able to resell the entire issue in which case it will hold the unsold stock on its own balance sheet. In pay back for taking on this risk the investment company receives an underwriting fee from the issuing company.
  • Monetary advisory on corporate finance activities such like advising on mergers and acquisitions. In general investment banks gross their income from fees charged to clients.These fees are typically set as a fixed percentage of the size of the deal being worked.

A securities firm helps in the trading of existing securities in the secondary markets. There are two major categories of securities firms that are

  • Brokers are the agents of investors who match buyers with sellers of securities. They make a commission for their service;
  • Dealers are the agents who link buyers and sellers by buying and selling securities. They embrace inventories of securities and sell these securities for a slightly higher price than they paid for them. They consequently make the bid-ask spread the difference between the best asks lowest price charged for immediate purchase of stock as well as the best bid highest price received for an immediate sale of a unit of stock.

The major service obtainable by brokers is securities orders. Orders are trade instructions indicate what traders want to trade whether to buy or sell and how much and when and how to trade and on what terms. Traders issue orders when they can't personally negotiate their trades. There are two major types of orders market orders and limit orders. Market orders are instructions to trade at the best price at present available in the market.


Related Discussions:- Explain investment banks and securities firms

Capital asset pricing model, Cascade Water Company (CWC) currently has 30 0...

Cascade Water Company (CWC) currently has 30 000 shares of common stock outstanding, trading at a price of R42 per share. CWC also has 500 000 bonds outstanding that are currently

Explain stronger dollar in the foreign exchange market, What kinds of U.S. ...

What kinds of U.S. companies would benefit most from a stronger dollar in the foreign exchange market?  Explain. U.S. companies that import merchandise from other countries wou

Differance between forward start option and a package, 1 Explain the differ...

1 Explain the difference between a forward start option and a package. Outperformance certificates are offered to investors by many European banks as a way of investing in a com

Components of working capital, Examine the components of working capital & ...

Examine the components of working capital & also explain the concepts of working capital.

What do you mean by utility, Q. What do you mean by Utility? Utility: -...

Q. What do you mean by Utility? Utility: - Financial leverage assists considerably the financial manager while devising the capital structure of the company. A high financial l

Enumerate the securities and investment analysis, Enumerate the Securities ...

Enumerate the Securities and Investment Analysis Purchase of bonds, stocks and othersecurities involve analysis and techniques which are highly specialized. An investorshoul

Call-put parity, Call-Put Parity P + S = C + E * [1/(1+i)] ^n     where...

Call-Put Parity P + S = C + E * [1/(1+i)] ^n     where:      P = the market price of the put    S = the market price of the stock    C = the market price of the call

State about investment decision, State about Investment decision Dec...

State about Investment decision Decisions relating to investment in both current and capital assets. Finance manager has to evaluate different capital investment proposalsan

Answer key, the approach focussed mainly on the financial problems of a cor...

the approach focussed mainly on the financial problems of a corporate enterprise

Estimate the cost of equity capital, You are required to choose a company f...

You are required to choose a company for analysis.  This company should be quoted on one of the principal international exchanges.  It may be your own company.  You should then do

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd