Hi, this is financial managements lecture 10. Today lesson
is financial institution. I have a list of ten of these. 1. Investment banks
and investments bank do lot of things, but they way we said a long time ago,
financial institution specialized on the primary market this means the issuer
of the securities. You can go to my Youtube channel on the KMpetrov. Lets’ getting
bank to investment bank, Lets out it as underwriting, underwriting means to
assume the risk of issuing the security, when a corporation wan to issue a
security, it guarantees them.
So that
the investment banks take the complete risk, of course they are not that stupid
to take the risk without reaching any advantage. The term subscription means
that the people want to buy a certain number of shares. At a certain price and
I ask you how many shares you want you say 1000, I want 100. So that they have
a complete list of everybody how want to buy the shares. They judge what the
price will be and base on that judgment usually the buyout form issuer and
sell, so they can make profit. They take
the risk by in the long term and long time it become very small. The whole
issue of risk in issuing security is extremely complicate.
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