Underwriting is defined as the process used by banks to raise money when a company or a government is issuing stocks or bonds.  

The term is also used in the insurance industry.

In insurance, the term underwriting refers to the process by which an insurer determines the risk of a client. 

Underwriting is a critical part of the stock market. This type of underwriting is usually specified as securities underwriting. This is part of the process that typically takes place when a company goes public, which is the first time that its shares will be bought and sold on the open the market. 


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When a company has an initial public offering (IPO), it approaches an investment bank about underwriting the shares of the company. The bank's job is to pay for those shares and then try to sell them to individual investors for a profit over what was paid to the company. 

Underwriting is a very high-value business. When a company goes public, the initial offerings can be worth millions upon millions of dollars. Investments banks make a large profit by underwriting the right companies because they know that private investors will be eager to get their hands on shares of a promising corporation. 



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