Underwriting is a process in which the investment banks are drawing or raising investment from the investors in the form of the investment capital on the behalf of the business organizations and government institutions that have actually issued those securities. The securities that are issued by the organizations and government entities are both the debt and the equity. Another definition of the underwriting can be defined as the process of issuing an insurance policy to the policy holder by the company.
The word underwriter has also go its origin from the term underwriting that means that the underwriter is taking the securities at a specified premium from the issuer or the issuing company. The under writer is writing its name as a risk taker on the securities that are underwritten and accept the risk associated with these securities at a specified premiums. This practice is still true today as the new issues of the securities are brought under the market under a syndicate underwritten that states that each firm takes the responsibility of the risk associated with the issued securities and each firm is responsible for selling the specific allotment of the securities allotted to that firm.
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