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Investment banking is the practice of raising money, either by an individual, corporation or government agency for the sole purpose of investing.
Here is a quick rundown of what goes on in an investment bank.
The Purpose of an Investment Bank
Along with helping people raise money, an investment bank is involved in;
- mergers and acquisitions
- derivative trading
- market making
- fixed income instruments
- foreign exchange
- commodities
- equity securities
An investment bank is split into the sections of:
- Front office
- Middle office
- Back office
Investment Bank Activities
Front office investment bank activities include the following.
- Investment banking (also called corporate finance):
1. help customers raise funds
2. give advice on mergers and acquisitions
3. subscribe investors to security issuance
4. co-ordinate with bidders
5. negotiate with a merger target
- Sales and trading:
1. buying and selling products
2. suggest trading ideas
3. take orders
4. price and execute trades
5. structures new products for a specific need
6. advising of strategies in various markets
7. proprietary trading
- Research
1. reviews companies
2. writes reports about buying and selling prospects
3. generate revenue
4. help traders in trading
5. suggesting ideas to customers
6. investment advice
Middle office investment bank activities include the following.
- Risk management: analyzing the credit and market risk that traders take
- Corporate treasury: responsible for the banks funding
- Financial control: analyzes the banks’ capital flow
- Corporate strategy: strategies for enhances the banks finances
- Compliance: the banks daily operations
Back office investment bank activities include the following.
- Operations:
1. checking data trades
2. quality control
3. transacting required transfers
- Technology:
1. in-house software maintenance
2. technical support
There are plenty of areas of investment banking you can get involved in if you are looking for a career in finance.
