Underwriting is the process by which a financial institution assesses risk and guarantees the purchase or sale of securities or insurance coverage.
Underwriting involves evaluating the risk and pricing of financial transactions. It is commonly used in:
In capital markets, underwriters (usually investment banks) guarantee that a company will raise the required funds, even if they must purchase unsold shares themselves.
Such activities are regulated by the Securities and Exchange Board of India in India.
"An investment bank underwrites an IPO and agrees to buy any unsold shares, ensuring the company raises full capital."