Question

What are the differences between commercial banking, investment banking and hedge funds? Describe their main functions and briefly explain the way their balance sheets differ from each other. Lastly explain the regulatory framework that applies to each one of these different types of financial institutions.

500-700 words.

Answer 1

• Investment banks underwrite securities for companies, advises companies on mergers and acquisitions, and participates in IPOs for companies wanting to raise capital. It also engages in sales and trading activities. The last part, the researchers, aid the traders in making decisions.thus they are on sell -side.

their main function is to help companies raise funds

• Commercial banks take deposits and make loans for the public. By pooling small sums of money, these banks are able to make more significant investments. They are on the buy-side.

their main function is to give loans and accept deposits from public.

• Hedge funds raise money from the public, pool the money, and follow a predefined investment strategy to minimize their risk and increase their returns. Hedge funds deal with public traded companies and are on the buy-side.

their main function is to manage risk caused due to fluctuations in exchange rates for companies.