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in a nutshell underwriting is a service usually provided by a large financial institution that involves it taking on risk in exchange for a profit the service but its name due to the fact that in the past bankers would take on risks associated with projects such as sea voyages with them while writing their names under the risk information section nowadays underwriters are involved in anything from the banking and insurance industries to securities for example with initial public offerings as an overly simplified example one company a decides to list its shares on the open market through an initial public offering a concept covered in another video - underwriter a is a major financial institution that believes company a is an excellent business 3 as such underwriter a buy securities issued by company 8 and later on sells them on the open market at a higher price so that it is rewarded for taking on risk in the end 1 the people behind Company A are happy because they received a bunch of money - underwriter a is happy because it was able to sell Company a shares for more 3 it remains to be seen based on how Company A share prices evolved if the investors who bought from underwriter AE will be pleased or not however please note that this is an optimistic example there is the possibility of the market not being interested in buying from underwriter a at a satisfactory price the possibility of underwriter a quote unquote tricking company a at the selling at ridiculously low prices and so on let's just say when when situations aren't guaranteed all in all though this much is certain there's a clear role in the financial ecosystem for well-funded underwriters who put their capital on the line if rewarded properly