A typical investment bank has a number of sources of revenue, the most common of which are:

• Trading: an investment banks undertakes market making activities whereby it stands ready any time a client requests it to quote a bid price or an offer price (or both at the same time) on different types of securities and derivatives. For example, if the client wants to buy a swap, the bank will assume the role of a counterparty (swap seller), and if the client seeks to sell a swap, the bank will act as a swap buyer. Market making is all about capturing the bid-ask spread, i.e., the difference between the price at which the bank stands ready to buy (bid price) and the price at which it stands ready to sell (ask, or offer price). Trading income takes the form of realized and unrealized profit and losses.
• Commissions: investment banks generate revenue from agency transactions where they act as intermediaries between different market players. More specifically, banks receive a percentage of the transaction value as their compensation for bringing transaction parties together.
• Asset management: investment banks receive fees from asset management activities such as the management of assets on behalf of their clients (portfolio management, sale of mutual funds, etc).
• Securities: investment banks generate revenue from securities-related activities such as advisory fees from mergers and acquisitions (M&As), dividends and interest from investment accounts, and so on.
• Underwriting: investment banks are well-known for their active role in underwriting security issues (initial public offerings). For their services, they receive underwriting income.
• Interest: other sources of income for investment banks include margin interest and interest from investment accounts. Income from margin interest is what a bank charges a client borrowing against the value of its securities to finance purchases (buying on margin).