An Investment Bank acts as a financial intermediary which performs different services including helping different companies and governments to raise money by issuing and selling securities and debts/bonds in the capital market, buying different derivatives on behalf of different clients to hedge risk and helping hedging foreign exchange risks.
Investment Banks usually acts as an intermediary between an issuer of securities and investors and help in Trade initialization, Trade booking, Trade Settlement and Payment etc.
Key Functions of Investment Banks:
Two key business areas in investment banking are:
An investment bank works in a manner that the process is subdivided into 3 parts
Derivatives are financial instruments which are linked to other financial instruments and theirs values are determined based on the value of the respective underlying assets. The most widely used underlying assets are stocks, bonds, commodities, currencies, interest rates and different market indexes.
Some of the most widely used derivatives include: