What are the five major functions of investment banking?
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Merger and Acquisition It is that area of corporate finance which involves strategy and also deals with the purchase, buying or joining of two companies. Investment banking firms represent their clients and do the negotiation, calculate the company values and also do the financial provisioning. Their main job here, however, is to issue new securities in the market.
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Risk Management Since there is quite a heavy capital involved, there obviously is a risk that comes with this capital and the business. The investment bank actually helps the company to take care of the financial risk that one is exposed to. One might say that the risk management is done even by the top asset management companies in India, it is majorly done by an investment bank, for their client.
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Doing Research Investment banking companies have one of the most important functions and that is of doing a good research. When there is a proper research involved, it helps in grading the companies so that it helps the investors in making a good and sound decision on the investment. Even the research reports tell us whether to buy, sell or hold base of the rating of the company. One also gets to know their worthiness through this company.
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Structuring the derivatives As a function of investment banking, for it to function well, it needs a strong team which is equip with proper technical knowledge as they also need to work on derivates that are of complex structure. An investment banking company actually prepares the derivative with a good strategy which is based on multiple and even single securities.
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Management of the investment This function is actually known as one of the most important jobs of an investment banking company. The investment banking company actually acts like a guide to the investor, as they purchase funds like the long short fund, trade securities and manage portfolios. Investment bank actually prepares some reports which are based on the performance of the company by which investment bank makes a decision on the financial securities.
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