The fee that an underwriter earns from underwriting a security (e.g., equity offering). The underwriter discount is the difference between the price paid to the issuer and the price at which an investment bank offers the security to the public. The size of this discount depends on a set of factors mainly including the size of an offering, the type of securities on offer, and the risk involved.
Typically, for large offering the discount tends to be small, and vice versa. Given the type of a security, the discount for a bond offering is less than the gross for an equity offering. In general, the riskier an issue, the higher the amount charged by an underwriter, and vice versa. Riskiness differs across different types of securities (debt vs. equity) or offerings (IPO vs. SEO).
This discount is also known as a gross spread.
