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Capital Markets and Investment Banking Process Paper - Essay Example

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Capital Markets and Investment Banking Process Name University Capital Markets and Investment Banking Process Investment Banking Process: Investment banking has no features like the traditional banking. Investment banks are involved in public and private market transactions for investors, companies and governments…

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Capital Markets and Investment Banking Process Paper

Investment banks usually perform three tasks: first, they assist the companies in designing the securities which have features that are most appropriate for a certain market; second, they buy these securities and third, they resell them to the investors. (Fabozzi, 2008) Investment banks raise capital for their client companies through underwriting in which it purchases a whole block of new securities and resells them to investors. In this way, the income earned is the difference of the amount given to purchase the new block of shares and the amount received by the investors. Apart from Merger & Acquisition (M&A) advisory services, a bank’s another integral and core function nowadays is Investment Management in which the bank manages the investments of clients. Security services are also an important feature for investment banks which include prime brokerage, financing and securities lending. Regardless of the activity undertaken by the investment bank, it needs to focus on its portfolio construction and management which will be done according to the portfolio strategy of the investment bank. This means the bank needs to make investments which ensure successful trading that could be done by making risk management a top priority. This would mean that if a company incurs a loss of on one of its investment, it should earn a profit of over 11% on another to make it even. ...
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