Why currency swap exchange principal both at start and end?
Because that’s the way CFA Institute says it’s done.
(In the real world, you don’t necessarily exchange notionals in a currency swap.)
The way CFAI frames it is as follows. You’re a US firm that needs CAD to invest in Canada. Financing cost in Canada would be high for this firm, but low if borrowed in US. A Canadian firm needs USD to invest in US. Financing cost in US would be high for this firm, but low if borrowed in Canada. A currency swap lowers financing costs for both firms. The US firm borrows USD, the Canada firm borrows CAD. They exchange a principal amount at initiation because the US firm needs CAD and the Canada firm needs CAD. When the swap expires (assuming no credit event and both parties still have the money), one party gets to keep a portion of the original principal amount depending on which way the USD/CAD exchange rate moves.
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