A tranche that is created from the collateral tranche (in a CMO structure), and whose coupon rate is inversely related to the reference rate (say 1-month LIBOR), i.e.,it offers a coupon that increases when interest rates fall and decreases when interest rates rise. The coupon rate is given as:

Coupon rate = K – L * (LIBOR_1-month)

Where K is the inverse cap (the maximum coupon rate that can be realized by the floater) and L is the coupon leverage (a multiple by which the coupon rate will change in reaction to a 100 basis point change in the reference rate).