Investment Banking Course (FREE) | Investment Banking Full Course For Beginners | Intellipaat

Introduction

This tutorial provides a comprehensive overview of investment banking based on the Intellipaat's Investment Banking Full Course for Beginners. It is designed for anyone interested in learning about the investment banking sector, including students and finance professionals. Through this guide, you'll understand key concepts, structures, and functions within investment banking and capital markets.

Step 1: Understand Investment Banking

• Definition: Investment banking is a specialized segment of corporate finance that assists organizations in raising capital, managing mergers and acquisitions, and providing financial advisory services.
• Key Functions:
  • Raising capital for clients through equity or debt offerings.
  • Advising on mergers and acquisitions (M&A).
  • Offering strategic financial advisory services.

Step 2: Explore the Financial System

• What is a Financial System?: A network of financial institutions, markets, instruments, and participants that facilitate the flow of funds.
• How It Works: The financial system connects savers who have capital to invest with borrowers who need capital.
• Functions:
  • Allocation of resources.
  • Risk management.
  • Price discovery through supply and demand.

Step 3: Learn About Financial Instruments

• Types of Instruments:
  • Equity: Stocks representing ownership in a company.
  • Debt: Bonds and loans that require repayment with interest.
  • Derivatives: Financial contracts whose value is derived from underlying assets (options, futures, swaps, etc.).

Step 4: Understand Financial Markets

• Key Markets:
  • Capital Markets: Involve the buying and selling of long-term securities.
  • Money Markets: Deal with short-term borrowing and lending.
  • Derivatives Market: Focus on contracts based on the value of underlying assets.

Step 5: Get to Know Financial Participants

• Types of Participants:
  • Investment Banks: Facilitate capital raising and advisory services.
  • Retail and Corporate Banks: Provide banking services to individuals and businesses.
  • Mutual and Hedge Funds: Pool funds from investors to invest in securities.

Step 6: Navigate Investment Banking Services

• Services Provided:
  • Underwriting of securities.
  • M&A advisory.
  • Restructuring and refinancing services.
• Investment Banks: These institutions play a crucial role in providing these services.

Step 7: Explore Derivatives and Their Applications

• Types of Derivatives:
  • Options: Contracts providing the right to buy/sell an asset at a predetermined price.
  • Futures: Agreements to buy/sell an asset at a future date at a price agreed upon today.
  • Swaps: Contracts to exchange cash flows between parties.
• Examples:
  • Currency Swaps: Exchange of cash flows in different currencies.
  • Interest Rate Swaps: Exchange of fixed interest rate payments for floating rate payments.

Step 8: Understand Fixed Income and Bonds

• Types of Bonds:
  • Callable Bonds: Bonds that can be redeemed by the issuer before maturity.
  • Putable Bonds: Bonds that allow the holder to sell back to the issuer at a specified price.
  • Zero Coupon Bonds: Bonds that do not pay interest but are sold at a discount.

Step 9: Learn About Asset Management

• Key Concepts:
  • Buy-Side Companies: Firms that buy securities for their own accounts.
  • Investment Mutual Funds: Pooled funds managed by professionals to invest in various securities.

Step 10: Familiarize with Securities Lending

• Process:
  • Borrowers and lenders engage in securities lending for various purposes, including short selling.
• Types of Securities: Stocks, bonds, and other financial instruments can be traded.
• Key Considerations:
  • Understand the fees, rebate rates, and the pros and cons of securities lending.

Conclusion

This tutorial provides a foundational understanding of investment banking, covering essential concepts and components of the financial system. Whether you're looking to pursue a career in finance or simply expand your knowledge, this guide serves as a stepping stone into the world of investment banking. For further learning, consider enrolling in comprehensive courses or seeking practical experience in the field.