An investment banker is a firm acting as an underwriter or agent that serves as an intermediary between an issuer of securities and the investing public.
The preliminary prospectus, also known as the red herring, is the first document released by an underwriter of a new issue to prospective investors. It provides financial details about the issue but parts of the document may be changed before the final prospectus is issued.
An underwriter assesses risks and decides whether or not these risks can be insured, setting the appropriate premium charges, typically based on the frequency of past claims. Additionally, underwriters play a crucial role in financial transactions by guaranteeing to buy unsold shares during new issue offerings.
