What does the term ‘underwriting’ refer to in the context of securities?

Underwriting in the context of securities specifically refers to the process by which financial institutions or investment banks help issuers raise capital by facilitating the issuance of new securities. This process typically involves the underwriters evaluating the financial needs of the issuer and determining the appropriate price and quantity of securities to be offered to investors. By underwriting the securities, the financial institution acts as an intermediary, ensuring that the issuer can reach the intended investors and successfully sell their securities, which is crucial for raising the necessary funds.

In addition to these functions, underwriters also often conduct due diligence on the issuer to assess the potential risks and rewards associated with the investment. They may guarantee the issuer a certain amount of capital by buying the entire issue and then selling it to the public, which provides a safety net for the issuer and ensures that they will receive the funds needed for their operations or projects.

The other options do not accurately capture the essence of underwriting. Trading securities on the open market refers to the buying and selling of existing securities, which is distinct from the initial issuance process that underwriting involves. Providing technical support for investment apps pertains more to technology-driven services rather than the capital-raising aspect of underwriting. Assessing the risk of corporate securities could be a part of the underwriting process,