Fin 402

Capital Markets and Investment Banking Process Paper

Investment banking provides a vast variety of services to our economy. Investment banks provide both public and private corporations with funds to help the growth of capital market. They also help aid in corporate mergers, acquisitions, and several types of financial transactions. This paper will describe the investment banking process as well as the function of portfolio construction. It will further identify the capital market instruments and asset classes.

Investment banking process is rather a long process to understand and has several stages. The most visible stage is actual investment of funds and raising capital. This is the final stage, but this is the only part that most people see and understand. The process starts off by analyzing a business’s financial performance and operations. The next step would be find investors that are willing to buy stocks or possibly buying out a competitor. The third step is initiating contacts with investors or purchasers. Information is exchanged between parties who are interested. The final step includes closing of the deals. At times, this can be the most challenging since more demands are made. They can also face legal issues which can make the process even longer than anticipated.

Capital market instruments are fixed-income obligations that you can buy and sell to others. They are traded in the secondary market only. There are 4 types of instruments and they are U.S. Treasury securities, U.S. government agency securities, municipal bonds, and corporate bonds. These instruments are all used to make a profit for the investing company, just in different ways and through different avenues like stocks, bonds, debentures, foreign exchange, treasury bills, or fixed deposits. They are all tools that allow you to play the game of an investor (Reilly & Brown, 2006). Stocks tend to fluctuate more unexpectedly than bonds do, and treasury bills are considered very...