Underwriting Agreement

AAA

DEFINITION of 'Underwriting Agreement'

A contract between a group of investment bankers who form an underwriting group or syndicate, and the issuing corporation of a new securities issue. The underwriting agreement contains the details of the transaction, including the underwriting group's commitment to purchase the new securities issue, the price that the underwriting group will pay to the issuing corporation and the initial resale price.

INVESTOPEDIA EXPLAINS 'Underwriting Agreement'

The underwriting agreement can be considered the contract between a corporation issuing a new securities issue and the underwriting group that has agreed to purchase and then resell the issue for a profit. The purpose of the underwriting agreement is to ensure that all of the players understand their responsibility in the process, thus minimizing potential conflict.

RELATED TERMS
  1. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  2. Syndicate

    A professional financial services group formed temporarily for ...
  3. Lead Underwriter

    A investment bank or other financial outfit that has the primary ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  5. Investment Banker

    An individual who works in a financial institution that is in ...
  6. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
RELATED FAQS
  1. What types of companies hire a chartered financial analyst (CFA)?

    The Chartered Financial Analyst, or CFA, program is a professional certification awarded by the CFA Institute. CFA candidates ... Read Full Answer >>
  2. What are the major categories of financial institutions and what are their primary ...

    In today's financial services marketplace, a financial institution exists to provide a wide variety of deposit, lending and ... Read Full Answer >>
  3. What's the difference between investment banks and commercial banks?

    Investment banking and commercial banking are two divisions of the banking industry that provide substantially different ... Read Full Answer >>
  4. Who facilitates buying and selling on the primary market?

    There are several important actors that facilitate buying and selling on the primary market, the home of initial public offerings ... Read Full Answer >>
  5. What is the difference between an investment and a retail bank?

    The activities and types of clients for an investment bank versus those for a retail bank highlight the primary difference ... Read Full Answer >>
  6. How can I buy shares in the primary market?

    If you want to buy shares in the primary market, you need to either be part of a syndicate or one of the lucky few whose ... Read Full Answer >>
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

    Top Things To Know For An Investment Banking Interview

    Without some basic knowledge, you won't get the job. Find out what you need to know and how to prepare.
  3. Professionals

    How To Make $1 Million In Finance

    The best opportunities to maximize sheer earning power are in investment banking, private equity and hedge funds. Find out what it takes to succeed in these ultra-lucrative areas of finance. ...
  4. Professionals

    Making It Big On Wall Street

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

    Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.
  6. 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.
  7. Professionals

    Getting An Investment Bank Job During A Recession

    Even in a recession, investment banks are seeking new talent. Learn what will set you apart from the crowd!
  8. Investing Basics

    Explaining the Volcker Rule

    The Volcker Rule prevents commercial banks from engaging in high-risk, speculative trading for their own accounts.
  9. Investing Basics

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  10. Investing Basics

    What is a Private Company?

    A private company is any corporation that does not have shares publicly traded in the equity markets.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!