Industry Terms – The Letter U/V

TrevPAR World Industry Terms

Underwater – 1. The condition of a call option when its strike price is higher than the market price of the underlying stock.The condition of a put option when its strike price is lower than the market price of the underlying stock. Also known as out of the money, an underwater option would be worthless if it expired today.

Underwriter – A company or entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter’s distribution network.

Underwriters generally receive underwriting fees from their issuing clients, but they also usually earn profits when selling the underwritten shares to investors. However, underwriters assume the responsibility of distributing a securities issue to the public. If they can’t sell all of the securities at the specified offering price, they may be forced to sell the securities for less than they paid for them or retain the securities themselves.

Underwriting – the process of evaluating an investment, including its potential value, risk, future cash flow, probable return, and ability to fund debt; performed by both investors and lenders.

Author: Derek Martin 

Source – Hotel News Now

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