What is underwriting in the context of securities?

Underwriting in the context of securities primarily refers to the process where an investment bank or financial institution purchases new securities from a company and then takes on the responsibility of selling those securities to the public or investors. This process serves as a critical step in the capital raising mechanism for businesses looking to issue stocks or bonds.

Option C accurately describes underwriting as it encompasses the purchase of a new security issue from the issuer and its subsequent resale to investors. This is essential for companies to raise the necessary funds while providing a means for investors to obtain new shares or bonds. Underwriters also assess the value of the securities, help determine the offering price, and provide advisory services throughout the issuance process.

Understanding this concept is particularly important in finance since it involves not just the movement of funds but also the valuation, market acceptance, and pricing strategies associated with new security issues. This role is crucial for maintaining liquidity in the market and ensuring that fresh capital can flow into growing companies.