• Investment Bank

    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:

    • Helps Companies and Government to raise money from Capital Market using Securities or Debt/Bond and provides special products and services to the corporate and government clients
    • Provides strategic, financial and valuation advisory services
    • Helps companies involved in mergers and acquisitions (M&A)
    • Provides services such as market making, trading of derivatives and equity securities
    • Act as a broker and dealer to complete trading activity in capital market
    • Advise companies to either sell or buy assets (securities/bonds/funds etc)
    • Helps in booking OTC Derivatives trades on behalf of client to hedge risks
    • Works as a Swaps Dealer (SD) or Major Swap Participants (MSP) for different smaller banks of parties

    Two key business areas in investment banking are:

    1. Sell side: It is involved in trading of securities for cash or for other securities. Also, it handles promotion of securities.
    2. Buy side: It is involved in advising the institutions on buying of investment services, private equity funds, mutual funds, hedge funds and unit trusts.

    An investment bank works in a manner that the process is subdivided into 3 parts

    Derivatives

    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:

     

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