Overview of Investment Banking

The material in this chapter should be cross-referenced with Case Study 1, “Investment Banking in 2008 (A),” and Case Study 2, “Investment Banking in 2008 (B).”

Investment banking changed dramatically during the 20-year period preceding the global financial crisis that started in mid-2007 as market forces pushed banks from their traditional low-risk role of advising and intermediating to a position of taking considerable risk for their own account and on behalf of clients. This high level of risk-taking, combined with high leverage, transformed the industry during 2008, when several major firms failed, huge trading losses were recorded, and many firms were forced to reorganize their business.

Risk-taking activities ...

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