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Firm Commitment Underwriting Meaning & Definition

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Definition of Firm Commitment Underwriting

Firm Commitment Underwriting guarantees the issuer all of the money right away. The underwriters purchase all of the securities from the issuer regardless of whether or not they can sell the securities to their customers.

Applying "Firm Commitment Underwriting" to Securities Exams:

In a firm commitment underwriting the underwriters put their capital at risk by promising to purchase all of the securities from this issuer. The more in demand the offering is the greater the likelihood that the offering will be done on a firm commitment basis. A firm commitment underwriting is the best type of underwriting agreement for the issuer.

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