An inverse floater that is combined with a path-dependent coupon. For each period, the coupon depends on the level of the previous coupon, and hence the ratchet mechanism. The coupon is calculated as the maximum of either the previous coupon plus a given spread minus the fixing of an underlying index, or a preset floor. The following formula gives the coupon value:

where: M_i denotes the periodic margin.

An investor will receive a high coupon if the forward rates remain below the periodic margin.