Lehman Formula


DEFINITION of 'Lehman Formula'

A compensation formula developed by Lehman Brothers for investment banking services. The structure is as follows:

-5% of the first million dollars involved in the transaction
-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million)

BREAKING DOWN 'Lehman Formula'

Because of inflation, investment bankers often seek some multiple of the original Lehman formula.

  1. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  2. Exit Fee

    A fee or charge assessed to an investor for withdrawing money ...
  3. Advisor Fee

    The fee that is paid to a financial advisor for recommending ...
  4. Origination Fee

    An up-front fee charged by a lender for processing a new loan ...
  5. Underwriting

    1. The process by which investment bankers raise investment capital ...
  6. Investment Banking

    A specific division of banking related to the creation of capital ...
Related Articles
  1. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  2. Professionals

    Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.
  3. Professionals

    Wanna Be A Bigwig? Try Investment Banking

    A career in this high-stress field can be very rewarding for the right person. Find out if you have what it takes.
  4. Personal Finance

    Case Study: The Collapse of Lehman Brothers

    This company survived many financial crises in its long history. Find out what finally drove it to bankruptcy.
  5. Personal Finance

    How Will The Subprime Mess Impact You?

    The subprime collapse could mean doom and gloom for housing, equities and the overall economy.
  6. Professionals

    Credit Risk Analyst: Job Description and Average Salary

    Learn what credit risk analysts do every day and how much money they make on average, and identify the skills and education needed for this career.
  7. Economics

    The Difference Between Finance And Economics

    Finance and economics are often taught as separate subjects, but they are interrelated disciplines that influence one another in many ways.
  8. Professionals

    A Day in the Life of an Investment Banker

    Take a look at a day in the life of an investment banker, one of the most sought-after and stressful jobs in the financial sector.
  9. Professionals

    Top 3 Misconceptions About Financial Analysts

    Learn misconceptions about financial analysts, such as they exclusively study the stock market, they are the same as financial advisors and they are all rich.
  10. Fundamental Analysis

    Investment Banks: Not a Good Bet Right Now?

    Investment banks might appear safe to investors at the moment, but they're probably more dangerous than advertised.
  1. Do financial advisors have to find their own clients?

    Nearly all financial advisors, particularly when new to the field, have to find their own clients. An employer may provide ... Read Full Answer >>
  2. Do financial advisors get drug tested?

    Financial advisors are not drug tested by any federal or state regulatory body. This means you may receive your Series 6, ... Read Full Answer >>
  3. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
  4. Do financial advisors have to be licensed?

    Financial advisors must possess various securities licenses in order to sell investment products. The specific products an ... Read Full Answer >>
  5. Do financial advisors need to meet quotas?

    Most financial advisors are required to meet quotas, particularly if they work for firms that pay base salaries or draws ... Read Full Answer >>
  6. Does a financial advisor need an MBA?

    Obtaining a license as a financial adviser does not require an Master's of Business Administration (MBA) degree. The Certified ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center