Investment Banking, Products, and Risk Management Solutions
Investment banks are financial enterprises that specialize in debt financing, equity underwriting, and mergers and acquisitions. They provide capital raising services and financial advice to government agencies, institutions, and corporations. Investment banks feature a wide array of products and have expertise in capital markets, finance, and trading. They specialize in collateralized, commercial, mortgage, and asset-backed securities.
What Do Banks Offer
Banks help their clients to increase liquidity and manage risk. They offer portfolio trading services and equity derivatives. A large selection of services is available to affluent customers, distributors, corporations, large businesses, and institutional investors. These include clearing services, options and futures execution, and clearance of fixed-income securities, credit derivatives, and OTC interest rates. In addition, investment banks offer solutions and strategic advisory on distribution of equity, financial restructuring, capital raising, M&A transactions, divestitures, and derivative securities.
Banks also offer auxiliary services such as research, sales, and transition management as well as customized financial strategies. Customers can take advantage of their credit liquidity and risk management solutions. Investment banks offer products such as claims monetization, alternative letters of credit, and lease and receivables put. Claims monetization solutions include a variety of illiquid products such as auction rate securities, structured investment vehicles, private placements, and SIVs. Banks help their customers to finance and monetize illiquid types of assets. Transition management solutions are offered to companies and help reduce administrative expenses and risk. Prime brokerage is another service offered by investment banks. They feature margin solutions and asset-servicing products as well as introductions across investment vehicles. These include futures, fixed income securities, and equities. Investment banks offer capital introduction and consulting services to hedge funds, foundations, endowments, pension funds, and large institutional investors. They specialize in a variety of investment strategies and vehicles such as credit, event driven, and macro strategies.
Responsibilities
Investment banks securitize, originate, and trade different asset-backed securities. They offer advice on trading strategies, benchmarks, and major asset classes. In addition, banks offer currency services to enable investors to trade on the forex market. Customers can take advantage of comprehensive solutions that allow for consistent and competitive pricing in cross-currency swaps, options, and forwards.
Bankers are organized into regional and product groups and work to create customized financial strategies. Basically, investment banks execute securities, offer advice on mergers, provide general advisory services, and raise capital. While large investment firms such as J.P. Morgan, Morgan Stanley, and Citigroup offer all services, small investment banks may offer only some of them.
Raising capital is one of the main functions of banks. They assist companies to find funds for different objectives such as mergers and acquisitions, project financing, real estate purchases, debt reduction, and others. Funds can be in the form of hybrid securities, preferred and common shares, debt, and other instruments. Banks help companies to raise both equity and debt capital. Companies use it to create preferred shares and launch initial public offerings. Investment firms also help businesses to issue bonds (debt capital).
Investment firms also offer general advisory services such as business valuations and strategic planning. They help businesses to negotiate the terms of transactions, prepare financial and industry reports and analysis, and presentations and memorandums. In addition, investment bankers offer advice on due diligence and help coordinate accounting and legal advisors.
Finally, investment banks can be divided into two types. Some firms work with hedge, mutual, and public funds and offer advice on investing and trading securities. Other banks offer market making services, place new bond issues, and sell stock. The two types are called the sell and buy side.
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