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Decoding Initial Public Offering (IPO): What is it and How it works

Posted on by Imarticus Learning

Company ownership is often determined by dividing the perceived value of an organisation along with the individual stakeholders and their respective shares. However, trading shares in a privately-held company is subject to restrictions. These restrictions can be related to legal agreements, shareholder agreements, and company policies, limiting the stakeholders’ ability to freely trade their shares.

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In this case, an IPO is a process where a privately-held company offers its shares to the public for the first time. It allows privately-owned companies to transition to publicly-traded entities. Being enlisted on public stock exchange entities like New York Stock Exchange and NASDAQ, it becomes easier for both institutional and retail investors to transact these stocks. 

In this article, let’s learn in detail about the characteristics and features of an IPO, alongside knowing the various aspects of an investment banking course and derivative markets. 

What is Initial Public Offering (IPO)? 

An Initial Public Offering (IPO) is a process of offering company shares to the general public for the first time. It allows the company to raise their equity capital from private investors. 

Through an IPO, the company gets listed on public stock exchange listings, including stock ticker symbols and other easy ways to identify and trade stocks. In this modern digital ecosystem, IPO has become an integral part of raising capital in the public market and assessing a wider range of investors. 

History of IPO 

The history of IPO is unique and is the cause of the buzzword on Wall Street and among several investors for decades. The Dutch are the flag bearers of creating the concept of IPO by offering their shares to the Dutch East India Company. This has made the company available in the global market during that time. 

Since then, IPOs have been used in various ways by companies to raise their capital through public share ownership. IPO has become a boon to companies that have economically stabilised their market standpoint. 

Through the years, IPOs are well known for both their uptrends and downtrends in their issuance. Even individual sectors are prone to face such experiences in uptrends and downtrends through various economic factors. This was significantly on the rise during the 2008 financial crisis. 

In the 2008 financial crisis, the number of IPOs was substantially reduced, and for a few years, new listings became extremely rare in the global market. However, the recent uprising of start-up companies, reaching private valuations of more than 1 billion dollars, has created IPO buzz once again. This has majorly helped in reviving IPO in the modern market. 

How Does an IPO Work? 

Before the IPOs came into existence, the companies were considered to be private business entities. Due to this, businesses have only grown with a few shareholders like early investors, family, founders, and friends, alongside angel investors and venture capitalists. 

As the concept of IPO emerged, it provided the scope for the companies to raise lots of money. It also encourages company growth and increased transparency. 

There are also a few foundational steps to IPO. They are: 

  • Strategic review: The step for the organisation to perform several comprehensive reviews of operations and business goals.
  • Engaging underwriter: The organisation often tends to engage with various investment bank groups to work as an underwriter for the IPO. These underwriters work on commission to sell the initial block of shares.
  • Prospectus development: This helps in outlining the financial status of the company and also depicts the number of shares the company wants to issue. They also outline the future issues the companies might face.
  • Investor promotion: The companies promote IPO to their varied potential investors, who are also known as the ‘investor roadshow’ to raise their capital.
  • Share issuance: On the occurrence day of IPO, an initial share price and stock trading become public. 

Pros and Cons of IPO 

IPOs not only come with their pros but have various cons as well. Let’s see what they are: 

Pros 

Capital potential: IPO comes with the advantage that caters to the company to profit in the public market. 

Exposure: An IPO always involves a lot of public exposure that is great for the future of a company. They help the company to gain more respect in the industry and get better funding from the lenders. 

Allows early investments: By launching an IPO, the company can have early investors cashing in their investments. Going public enhances the company’s investments and also incurs a huge amount of profit. 

Cons 

Transparency requirements: Once the IPO takes over a company, the company has to disclose the financial details to the public. This includes not only their budget but also their quarterly and annual financial statements. 

Company disqualification: Even if a company might meet the SEC requirements, the bank will not be willing to facilitate the procedures. Due to the 2008 financial crisis along with the commencement of the COVID-19 pandemic, the IPO world is now leaning towards the ‘unicorn’ companies to qualify in the global market. 

Conclusion 

An IPO is considered the future of a company’s growing financial ecosystem. There are various other ways to impose an IPO in their company by not going public. Those methods are predominantly direct listings, SPAC, staying private and other different ways. 

If you want to take up an investment banking course, check out Imarticus Learning’s Certified Investment Banking Operations Professional course or CIBOP course. You will learn in detail about investment banking and IPO. You also will be open to the opportunity to earn more than 5 LPA and a guaranteed salary hike. 

To know more, check out the website right away: https://imarticus.org/

Investment Banking and the Role of Financial Intermediation

Posted on by Imarticus Learning

Investment banking now plays a vital role in the derivatives market as well as the money market. It is one of the most essential financial practices that help upgrade the nation’s economy.

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However, the role of financial intermediaries is much more pivotal in the case of investment banking. They act as a catalyst between two parties in a transaction. They come with tons of benefits to a consumer regarding safety, liquidity, and economies of scale. Even though in most cases, investment bankings try to eliminate the intervention of an intermediary, it curbs much more threats than in other areas of finance. 

In this article, let’s learn in detail about financial intermediation, alongside its types and roles to play in the financial sector. 

What is Financial Intermediation? 

To put it into simple words, a financial intermediation is a catalyst that acts as a middleman between two parties in a financial transaction. Financial intermediation is commonly used by investment banks, commercial banks, and mutual funds. It is a very beneficial catalyst for an average consumer that ensures the utmost safety of the bank and its assets. 

Financial intermediation often forms a safe environment for conducting financial transactions seamlessly. It is also a very flexible form of a catalyst and is not only restricted to third-party lenders and borrowers. Financial intermediation also holds the liability to adhere to the reserve bank and stock exchange guidelines. 

Types of Financial Intermediation 

Financial intermediation is not only limited to mutual funds and commercial banks. It is a huge spectrum and regulates various transactions inside a safe environment. Here are some examples of financial intermediation that would help you to understand its key functions in detail. They are: 

  • Commercial Banks: The relationship between lender and borrower is simplified. 
  • Stock Exchange: Shares and other stock exchanges are intermediated and centralised which further becomes easier access to both buyers and sellers. 
  • Pension and Mutual Funds: Future fund holders pay the current fund holders. 
  • Factoring Provider: In this case, the factoring clients often receive money from their providers to maintain the equilibrium of their outstanding receivables and enforce liquidity. 
  • Insurance: Over here, insurance companies act as an intermediary to protect their clients from various risks. 

Role of Financial Intermediation in Investment Banking 

Investment banking is one of the best ways to incorporate financial intermediation. They primarily create a central platform for intermediation enabling both parties for financial transactions. This is efficient from both sides. 

Here are some roles that investment banks generally play when it comes to financial intermediation. They are: 

Banks 

Banks are primarily known to safeguard your money and also maintain a lender-borrower relationship with you from time to time. In layman’s terms, banks earn money and offer their services in exchange for receiving payments via interest and other fees. Banks are also under commission for selling a financial product. 

Be it an investment bank or a commercial bank, both of them generate profit primarily by granting loans or providing fruitful investments. For investment banks, profit maximisation holds paramount importance. They are only achieved through stock market products, commodities, and real estate. 

Capital Markets 

In other words, financial intermediaries in a capital market are known as brokers. They help the investor to choose from a suitable stock market they would like to explore and buy their shares. For their brokerage, the investor has to pay a reasonable amount to their brokers for their service. 

Sometimes these brokers or financial intermediaries focus on electronic exchanges for direct trading. The brokers primarily work for Fintech companies offering customers low-cost access to stock exchange products. These financial intermediaries finance themselves via commissions which are further received from brokering securities of electronic exchanges. 

Advantages and Disadvantages of Financial Intermediaries 

Financial intermediation comes with both advantages and disadvantages. However, one has to dodge the disadvantages and take ‘advantage’ of their merits. Let’s find out what they are: 

Advantages

  • Financial intermediaries create a central market for financial transactions. 
  • They help in scaling the bureaucracy appropriately and take great care in advising clients for processing transactions. 
  • Financial intermediaries are extremely cost-efficient and have optimal security measures to acclimate to any adversities. 
  • Bigger financial intermediaries can spread their risks by investing more money from their clients in various financial products. 
  • Financial intermediaries help in reducing client risks. 
  • Financial intermediaries enable clients to make special use of financial services to point out seamless solutions in no time. 

Disadvantages 

  • Financial intermediaries are selfish and tend to cater to their own interests. 
  • The fees of financial intermediaries are much higher than the actual investment. This is mainly due to the profit that the intermediary wants to cover to make a profit. 
  • Financial intermediaries are often misleading and might not know the proper whereabouts of the market. 

Conclusion 

The existence of financial intermediation is not a new concept but has been in existence for decades. However, with digital transformation, the use of financial intermediation is reduced from time to time. 

If you are interested to know and learn in detail about risk management, the derivatives market, and the money market alongside getting an investment banking certification online, check out Imarticus Learning’s Certified Investment Banking Operations Professional course. You do not need any prior experience in investment banking and you can opt for this course if you are a Finance graduate. This is one of the best investment banking courses in existence and has provided over 40,000 placements. 

For more details, check out the website right away! Or Contact us through the chat support system, or visit one of our training centers in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, Gurgaon, or Ahmedabad.

How is derivatives market becoming popular amongst individuals

Posted on by Imarticus Learning

These days, people have numerous options to invest in. It is a tale of the past when people used to invest only in banks as fixed deposits. Investors have to count on investment banks to identify the most suitable financial instruments that they can invest in. It is interesting to note that investment banks sometimes engage in the smooth trading of financial instruments to ensure smart investments. 

Of all the instruments that are available in the market, derivatives are being preferred widely and are being used all across the globe. Due to its surging popularity, investment banks are also hiring individuals with extensive knowledge of the derivative markets. This article will help you learn derivative market and why it is gaining popularity. 

What is derivative market?

The derivative market comprises a number of financial instruments that can be used for trading. Derivatives consist of financial contracts, the value of which is dependent on other assets. One can trade it either on the stock exchange or from a dealer. The value of a derivative can also be dependent on a group of other assets. An investor has to analyse properly and place a bet on a financial instrument’s future price. This can fetch them huge rewards, making it an extremely profitable career. 

The functioning of the derivatives on the stock exchange happens following a set of regulations. Nevertheless, one cannot ignore the fact that the trade of derivatives is prone to huge risks. However, people are still attracted to it because of the huge returns that it fetches. Building a career in derivative markets is also another way in which investors are safeguarding themselves against market volatility. 

Players in the derivative market 

There are a number of participants in the derivative market. They are as follows:

  • Margin Traders: They count on collateral for conducting transactions using financial instruments. Marginal traders have to keep something as collateral to the counterparty in exchange for trading financial instruments. This also helps to cover the risk which might arise at the time of trading financial instruments. 
  • Hedgers: The reason why these investors invest in the futures market is that they want to safeguard themselves against price volatility. For hedgers, investing in the exchange market is a great way to protect against any changes that may arise in the future market. 
  • Arbitrageurs: These investors are the ones who earn profits during times of price volatility. They make profits from price differences that arise between markets. 
  • Speculators: These are the investors who foresee the future and invest in the financial instrument which can provide a great deal of value in the future. Speculators are always prone to risk because they need to predict the value of the financial instruments and assume which will be of high value. 

You can opt for an online course in investment banking that will teach you about the differences between the different kinds of players in the derivative market. All these learnings will help you build a lucrative career as an investment banker.

What do the derivative market courses equip you with?

The best online courses will help you acquire the knowledge through practical training that will make you job ready. The courses come with certification. Some of the courses include case studies and real-time discussions, which will prepare you for the real world. The training is often conducted by experts with commendable experience working with leading investment banks. You can also choose an online investment banking course with placement opportunities to bring your career on track. After the course completion, you will also get placement support. The live courses are facilitated by experts who have worked in leading companies. You can also opt for an offline programme.

Conclusion 

The online CIBOP (Certified Investment Banking Operations Professional) course by Imarticus will help you build a lucrative career. It is ideally suited for finance graduates with 0-3 years of experience. The course spans 150 hours. More than 1000 batches have availed benefits of the course to date. The average salary that learners will draw after completing this course is ₹5 LPA. Once you opt for this course, you can expect an approximately 60% hike in salary. Certification will add to your job profile and definitely improve your career prospects. 

What is derivatives in stock market?

Posted on by Imarticus Learning

Before we delve deep into the discussion, it is important for us to understand what a derivative is. A derivative can be referred to as a financial instrument, the value derived from another asset’s value. Derivatives can be traded in a number of result types, such as swaps, futures, and options. 

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Becoming a trader in the derivative market can offer you a great career option. This industry is highly dynamic and extremely fast-paced, which offers an exciting and challenging career option. This article will discuss what is derivative market, some of the perks of choosing a career in the derivatives market and how to get started with it. 

What are the Different Types of Derivatives?

Derivatives can be of different types and can be used for various reasons. Different types of derivatives can help in leveraging a position, speculation, and risk management. The most common types of derivatives are options, forwards, futures, and swaps. They are as discussed below:

  • Futures: This kind of derivative can be considered a pact between two parties who have agreed to purchase and deliver an asset at a price that has been agreed upon for a future date. 
  • Forwards: These can be considered similar to futures, but such contracts follow an over-the-counter trade procedure. The buyer and seller have the flexibility to customise the terms of the settlement, the size, and the procedure as well! A great deal of risk is associated with this kind of contract. 
  • Swap: As the name suggests, this kind of derivative is used to exchange or swap one cash flow for another. 
  • Options: This is akin to futures. Like futures, in this kind of derivative, two parties agree to purchase or sell an asset at some point in the future for a given price. However, what distinguishes it from futures is that in the case of options, there is no obligation with respect to exercising the agreement for purchase or sale. 

Benefits of Trading Derivatives

Derivatives can be put to use to meet a large number of requirements. Some of them are as mentioned below:

  • With the help of derivatives, you can earn money on the shares that have been lying idle for a long time. If there are price fluctuations, you can incorporate the use of derivatives to earn profit from them. With derivatives, you can conduct transactions without actually having to sell the shares. 
  • Derivative markets allow you to hedge against the price fall of shares that you have in your possession or a hike in the price of the shares which you might be planning to purchase. 
  • Risk transfer is another reason why investors resort to derivatives. If an investor is averse to risk, he can use derivatives to stay safe. On the other hand, investors who love taking risks (for instance, speculators) can improve their profits by conducting risky trades using derivatives. 

Why Should You Opt for a Career in Derivatives Markets 

A career in derivatives marketing is a lucrative option in modern times. Some of the benefits of working in the industry are as follows: 

  1. It is a dynamic industry where growth is extremely fast-paced. The industry is constantly evolving and requires traders to make quick decisions! It offers plenty of opportunities for advancement and growth. 
  2. It is a global industry which allows traders the freedom to work almost anywhere in the world. Traders can, therefore, enjoy the experience of working in different cultures with different sets of people. 
  3. The industry is highly lucrative, and traders can earn high bonuses and salaries. What can be better than an industry that will offer you a good environment to work in, along with rapid growth and great remuneration? 
  4. There is a lot of excitement associated with the derivative market. Anyone who wants to make quick money while gaining tons of experience will enjoy working in the derivatives market. 

All these things make the derivative market a great place to work. However, if you are absolutely new to the field, you need to gain some prior knowledge about how to get started. If you are willing to learn investment banking and the other nitty-gritty details about the derivatives market, an online course will help you with it so that you can establish a successful career in banking. 

Conclusion 

An online course will help you learn about the different aspects of the derivatives market without having to step out of the house. Knowledge of finance and economics will go a long way to help you establish a career in derivative marketing. You can sign in for a 180 hours long Certified Investment Banking Operations Professional (CIBOP) course, which will equip you with the skills to help you build a career in the field.

These online investment banking courses with placement assurances. You even get awarded certificates issued by some of the leading academic institutions that will impress recruiters and land you a rewarding job role.  

The purpose of derivatives markets: Benefits and overview

Posted on by Imarticus Learning

It is true that investment bankers have long been regarded as the go-to career for those looking to make money quickly. But investment bankers aren’t the only ones who can benefit from derivatives markets. In fact, anyone who is looking to diversify their investment portfolio or hedge against risk can take advantage of derivatives markets.

Derivatives are basically financial instruments whose value is derived from an underlying asset, such as stocks, commodities, currencies, or indices. These instruments are especially useful for those who want to protect their investment against market volatility. By purchasing derivatives contracts, you can ensure that the investment retains its value regardless of what happens in the markets. 

In this informative post, we will discuss the benefits of derivatives markets and provide an overview of how these markets work. We’ll also explore investment banker career paths and how derivatives can be used to improve investment performance. Ultimately, our aim is to provide readers with the necessary insights needed to make informed investment decisions. Read on to learn more about derivatives and investments.

Overview of Derivatives Markets 

Derivatives markets are complex, involving multiple parties and contracts. In a nutshell, investment bankers buy derivatives contracts from one party and sell them to another. So, don’t you think investment bankers need a clear understanding of derivatives markets to succeed?

When investment bankers buy derivatives contracts, they are essentially taking on the risk associated with the underlying asset. If the investment goes up in value, investment bankers make a profit; if it goes down, investment bankers lose money. That’s why investment bankers must carefully assess any potential investment and be aware of the risks involved before entering a position.

Benefits of Derivatives Markets 

There are numerous benefits to using derivatives markets.

  • They provide investment bankers with the tools to make highly leveraged investments without taking on too much risk. Furthermore, derivatives can also be used to hedge against risks and diversify investment portfolios.
  • Derivatives markets offer investment bankers the opportunity to take advantage of market volatility and speculate on prices. By buying and selling derivatives contracts in response to market movements, investment bankers can increase their profits significantly.
  • Derivatives markets are also highly liquid, meaning investment bankers can enter and exit positions with ease. As a result, investment bankers can react quickly to market shifts and capitalize on opportunities.
  • Finally, investment bankers also have access to a wide variety of derivatives products, such as futures and options. This allows investment bankers to tailor their investment strategies according to the specific needs of their clients.

How can derivatives be used to improve investment performance?

Investment bankers can use derivatives in various ways to boost investment returns. One of the most common strategies is hedging. By buying put options, investment bankers can protect against a decline in the value of an asset and safeguard their investment gains.

Investment bankers can also take advantage of market volatility by speculating on prices. By buying and selling derivatives contracts in response to changes in the market, investment bankers can increase their profits significantly.

Finally, investment bankers can also use derivatives to diversify their investment portfolios. This means investment bankers can spread their risk across an array of asset classes and sectors, which can help reduce losses if one sector starts to perform poorly.

Discover Investment banking courses with Imarticus Learning

Imarticus Learning offers investment banking courses to help investment bankers gain the skills they need to succeed in today’s competitive investment banking environment. 

Through our investment banking courses, you will develop an understanding of derivatives markets and learn how to use these markets to maximize investment returns.

 Course Benefits for Learners:

  •  Students will gain in-depth knowledge of derivatives markets and investment strategies. 
  • Students who are looking to begin their investment banking career may get the help to succeed in the competitive job market.
  • After completing the investment banking courses after graduation, investment bankers can be assured that they have the knowledge to take on investment banking roles with greater confidence. 

 Contact us through chat support, or drive to our training centers in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, Gurgaon, or Ahmedabad.