"... consider a firm wishing to issue securities. When firms issue securities, they hire a bank as an underwriter. The bank underwrites securities by guaranteeing a fixed amount of proceeds that the issuing firm receives when bonds are sold to investors. In addition to assuming the market risk (and potentially the risk of reputation loss as well), the underwriter also assists the issuer with documentation of the prospectus and with marketing and selling of the bond. The issuer pays a fee to the underwriter for its service which is fully paid at the time the issuance."
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Original Language: English
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Sources
Ayako Yasuda, "Relationship capital and competition in the corporate securities underwriting market." In: Wharton School Pennsylvania Working Paper. 1999.
https://en.wikiquote.org/wiki/Underwriting
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Underwriting
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