What role do investment banks typically play in the financial markets?

Investment banks play a crucial role in the financial markets primarily by facilitating the issuance of new securities. This involves helping corporations, governments, and other entities raise capital by issuing stocks and bonds. Investment banks assist in the underwriting process, which includes evaluating the risk of the securities being offered, pricing them appropriately, and then selling these securities to investors. This service is essential for businesses looking to fund operations, expansion, or other capital projects, allowing them to access necessary capital from the public and institutional markets.

In addition to underwriting, investment banks provide advisory services related to mergers, acquisitions, and other financial strategies, which further enhances their role in capital markets. This service makes investment banks distinct from other financial institutions that focus more on consumer-oriented services such as retail banking, asset management, or insurance products.