An interest rate derivative whose payoff is inversely related to changes in interest rates. Principally, inverse floating rate notes are not options, but rather they are bonds embedded with optionality. In fact, an inverse floating rate note is a combination of an interest rate cap/ interest rate floor, a swap, and a bond issue. This optioned structure, so to speak, is usually used by financial institutions and fund managers as an alternative for floating rate instruments. Examples of inverse floating rate notes include especially structures, such as quanto options, that can be denominated in a base currency and paid in a foreign currency, or vice versa.