Underwriting Agreements

Search Dictionary

Definition of 'Underwriting Agreements'

An underwriting agreement is a contract between an underwriter and an issuer of securities. The underwriter agrees to purchase all of the securities being offered by the issuer at a specified price. The underwriter then resells the securities to the public at a higher price, making a profit on the difference.

Underwriting agreements are important because they help to ensure that new securities are sold to the public at a fair price. The underwriter's role is to act as a buffer between the issuer and the public, and to ensure that the securities are priced appropriately.

There are two main types of underwriting agreements: firm-commitment underwriting and best-efforts underwriting.

* In a firm-commitment underwriting, the underwriter agrees to purchase all of the securities being offered by the issuer at a specified price. The underwriter then resells the securities to the public at a higher price, making a profit on the difference.
* In a best-efforts underwriting, the underwriter does not agree to purchase all of the securities being offered by the issuer. Instead, the underwriter agrees to use its best efforts to sell the securities to the public. If the underwriter is unable to sell all of the securities, it does not have to purchase them.

Underwriting agreements are important because they help to ensure that new securities are sold to the public at a fair price. The underwriter's role is to act as a buffer between the issuer and the public, and to ensure that the securities are priced appropriately.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.