Investment Banking Operations

How Investment Banking Operations Differ From Other Banks?

Unlike commercial banks and savings and loans, investment banks do not seek cash deposits from customers in the form of checking and savings accounts, and they do not make traditional interest-bearing loans to individual customers.

Investment banks instead make their money primarily

By advising corporate clients on the creation of stocks, bonds and other securities

By underwriting securities

By facilitating mergers and acquisitions, along with any due diligence and securities exchanges that may go along with them.

And by brokering (or selling) securities to investors.

Investment bankers have also created a broad array of investment options to go along with traditional stocks and bonds, including securities derivatives such as call and put options, which allow investors to lock in a buy or sell price on an investment at a future date, and credit default swaps, which insure bond buyers against the risk that a bond seller will renege on the debt.

Investment banks also lend stocks to facilitate short trades, in which speculators borrow stock and sell it in hopes that its price will decline before they rebuy it and return it to the lender.