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Variable Rate Demand Note (VRDN)

Variable Rate Demand Note (VRDN)

What is 'Variable Rate Demand Note - VRDN'

A debt instrument that represents borrowed funds that are payable on demand and accrue interest based on a prevailing money market rate, such as the prime rate. The interest rate applicable to the borrowed funds is specified from the outset of the debt, and is typically equal to the specified money market rate plus an extra margin.

Explaining 'Variable Rate Demand Note - VRDN'

Because money market interest rates, such as the bank prime rate, are variable over time, the interest rate applicable to this type of demand note is variable as well. Every time the prevailing money market rate changes, a variable rate demand note's interest rate is adjusted accordingly.

As the name implies, these debt instruments are payable on demand. This means that the lender of the funds can request repayment of the entire debt amount at its discretion, and the funds must be repaid once the demand has been made.


Further Reading

Bond insurance and liquidity provision: Impacts in the municipal variable rate debt market, 2008-09Bond insurance and liquidity provision: Impacts in the municipal variable rate debt market, 2008-09
journals.sagepub.com [PDF]
… This variable con- trols for possible imbalances between supply and demand and for issuer timing of bond sales, which both may have important effects on … We expect a positive relationship between supply and rate. A number of bond issue features serve as control variables …

The fragility of discretionary liquidity provision-lessons from the collapse of the auction rate securities marketThe fragility of discretionary liquidity provision-lessons from the collapse of the auction rate securities market
papers.ssrn.com [PDF]
… This variable con- trols for possible imbalances between supply and demand and for issuer timing of bond sales, which both may have important effects on … We expect a positive relationship between supply and rate. A number of bond issue features serve as control variables …

New Approaches to Debt Financing.New Approaches to Debt Financing.
eric.ed.gov [PDF]
… This variable con- trols for possible imbalances between supply and demand and for issuer timing of bond sales, which both may have important effects on … We expect a positive relationship between supply and rate. A number of bond issue features serve as control variables …

Municipal bonds: a contingent claims perspectiveMunicipal bonds: a contingent claims perspective
www.sciencedirect.com [PDF]
… This variable con- trols for possible imbalances between supply and demand and for issuer timing of bond sales, which both may have important effects on … We expect a positive relationship between supply and rate. A number of bond issue features serve as control variables …


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Section 508

WCAG 2.0

Section 508