Question

The issuer of the securities remains exposed to both pricing risk and marketing risk in a ____

A) Bought deal B) Underwriting syndicate C) Typical underwriting D) Best-efforts underwriting

Answer 1

Solution:

The issuer of the securities remains exposed to both pricing risk and marketing risk in a

D) Best-efforts undertaking.

Explanation: Best Efforts Underwriting is when an underwriter to give highest personal effort to sell as much as shares but in best-efforts underwriting , underwriters are relieved from the obligation to purchase any of the share, which they can not sell. Hence, in this type of underwriting, the issuer of the security remains exposed to both pricing and marketing risk.