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Bank Processes Essay

1151 words - 5 pages

Capital Markets and Investment Banking Process Paper

FIN 402

May 6, 2012

Alger Marable

Capital Markets and Investment Banking Process Paper
Investment banking is a crucial part of our global business environment. Investments, banking, and other capital markets now have a valuable role in business and everyone’s daily lives. There are several strategies and methods that can be identified for effective and productive investment banking processes. Choosing an investment bank or firm can depend on the investor themselves. Some processes and guidelines can vary from firm to firm, this would all depend on the investor and the ...view middle of the document...

The underwriters who manage the IPO’s either on a firm commitment or best efforts basis can purchase shares at a discounted rate then resell to the public for a full public offering price. Other important key players in an IPO process are lawyers. Companies and their underwriters must represented by legal counsel. All company documents must be reviewed and identified if any problems are present before offered to the public. As with any negotiation, the closing part can be the most difficult part in the process; this is when good investment analysts come in handy.
Asset Classes
Accord to Investopedia (2012) asset classes are “categories are often mixed together, describing large-cap stocks or short-term bonds asset classes is incorrect. These investment vehicles are asset class categories, and are used for diversification purposes”. The allocation of assets are important because investors must select from a various choice of decisions of investments, whether it is stocks, bonds, and cash equivalents. Several factors must be considered for the investor as well when selecting asset classes for an investment portfolio. Pricing, age, amount of risk, market reach, investment goal, rate of return, risk tolerance, conservative versus aggressive are all factors and decisions an investor will have to delegate when asset classes are selected for an investment portfolio. Two of the most important factors to remember in the process of selecting asset classes in an investment portfolio are age and the risk tolerance involved in the portfolio. Age is an important consideration because ultimately time is money, and how much time we have determines how much money we can make. If an investor losses 60% of their portfolio value at the age of 40 compared to at the age a 70 there are certain decisions the 40 year old can make that the 70 year old cannot make. Risk tolerance is another important factor to remember when choosing asset classes, is the investment conservative? Or aggressive? Again we can go back to the age factor of the investor.

Capital Market Instruments
According to Campbell R. Harvey (2012)” Capital market instruments are“Any market in which securities are traded including stock and bond markets. Companies and governments use capital markets to raise funds for their operations. Capital markets include primary markets, such as IPOs that are placed with investors through underwriters, and secondary markets, in which all subsequent trading takes place. Government agencies in different countries regulate local capital markets, though some, especially exchanges, play some role in regulating themselves”. Primary markets are used for new issues and secondary markets are used for existing issues for trading purposes. Stocks are bonds are the basic Capital market instruments which are used in both...

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