16657 Lecture Notes - Lecture 8: Securitization, Commercial Paper, New York Stock Exchange
Document Summary
What are deficit units and surplus units; and give examples of both. The deficit units comprise companies which require funding and in order to arrange this they engage the investment bank. Deficit units are people that are sourcing debt financing. For example, someone applying for a home loan. The surplus units comprise fund managers also referred to as institutional investors. Surplus units are people who have savings that can use this money to fund the deficit unit. Institutional investor is the term of the large pooled superannuation, managed investment and insurance funds; they employ (professional) financial analysts to assess the potential of possible investments. They are distinguished from retail investors who are individuals who invest on their own behalf. In the primary market, investors buy directly from the issuing company. Companies issuing securities via the primary capital market hire investment bankers to obtain commitments from large institutional investors to purchase the securities when first offered.
