A fixed-rate loan that is synthetically constructed using interest rate swaps. A debtor with a floating-rate loan can convert this loan into a fixed-rate loan in an attempt to hedge against foreseen increases in interest rates. To that end, the debtor can enter the swap market to lock in his interest expense by concluding an interest rate swap in which he pays fixed and receives floating. The two floating rates (the one the debtor pays on the debt and the one he receives from the swap) cancel out each other leaving the debtor only with a fixed rate that would help stabilize his interest payments in an environment of upward moving rates.

Of course, the life of the swap should be equal to the remaining life of the debt under conversion.

For a detailed example, see: constructing a synthetic fixed-rate loan using swaps.