Discussion
Which among the following is the act of taking on a risk for a fee?
Answer: D
Correct answer: Underwriting
Underwriting is the acceptance of a risk in return for a fee. In a securities issue the underwriter agrees to take up whatever part of the offering the public does not subscribe, so the issuer is assured of its money whatever the market does.
The same word covers the parallel activity in insurance, where the insurer accepts the risk of a loss in return for a premium. An initial public offering is the issue that may be underwritten rather than the act of underwriting it, and the other two options name software and analytical techniques.
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