What is a Firm Commitment?

Business & Management
#1

An underwriter’s agreement to bear all inventory risk and acquire all securities for an initial public offering (IPO) straight from the issuer for sale to the public is known as a firm commitment in finance. It’s also known as a “purchased deal” or “strong commitment underwriting.” A lending institution’s pledge to enter into a loan arrangement with a borrower within a specific time frame is often referred to as a timeframe. The firm commitment phrase is also used in the accounting and reporting of derivatives utilized for hedging purposes.