Underwriting is the process by which an investment bank or other financial institution assesses and assumes the risk of issuing new securities, such as stocks or bonds, on behalf of a company. The underwriter guarantees the sale of the securities by purchasing them from the issuer and reselling them to the public or institutional investors. This process helps companies raise capital while transferring the risk of the issuance to the underwriter. Successful underwriting is crucial for the smooth functioning of capital markets.