Coupon leverage

Coupon leverage, or leverage factor, is the amount by which a reference rate is multiplied to determine the floating interest rate payable by an inverse floater.^[1] Some debt instruments leverage the particular effects of interest rate changes, most commonly in inverse floaters.^[2]

As an example, an inverse floater with a multiple may pay interest a rate, or coupon, of 22 percent minus the product of 2 times the 30-day SOFR (Secured Overnight Financing Rate).^[3] The coupon leverage is 2, in this example. The reference rate is the 30-day SOFR.