Rounding in All Derivatives Calculations

[cgottuso8190]

Despite trying different degrees of rounding (1, 2, 3..out to 5 places), CFAI always seems to surprise me with their rounding, or lack thereof. I can never get the exact figures they calculate. So, in the next question, I adjust my rounding to what they used in the prior question and……they round to a different place.
What decimal setting are you guys using on your calculator? I had used 5 for quite some time but now I have my doubts….

 

[Stevie Ray]

I do 5. One thing I realized is that some of the EOCs in the derivatives actually round to less decimal places than I do. So look into that, your answer may actually be more accurate than theirs. I think you are fine with 5.

 

[cgottuso8190]

Damnit - reviewed some FRAs and four decimal places got me reasonably close. Moved onto currency swaps, four decimal places is nowhere close - five is closer. Annoying…

 

[cpk123]

what never made sense to me is why would you do rounding during the intermediate steps of the problem.
do the problem to the full extent of decimals - and then finally round out before marking your answer. - that is the way I would do it.
keeping # of decimals to max - which means do not round –> does not hurt you in your calculations - the calculator is doing the heavy lifting.

 

[bloodline]

cpk123 wrote:
what never made sense to me is why would you do rounding during the intermediate steps of the problem.
do the problem to the full extent of decimals - and then finally round out before marking your answer. - that is the way I would do it.
keeping # of decimals to max - which means do not round –> does not hurt you in your calculations - the calculator is doing the heavy lifting.

Except that when i did this for currency swaps, it did hurt my answers…at least as far as the CFA text book is concerned. The answer in the text book kept all intermidiary calculations to four decimal places while i left mine at five…the results was a difference of about 0.00007 which is not much, but when this is multiplied by a notional amount of 25 million, the errors become quickly magnified.
I am hoping an exam question will indicate the number of decimal places to use.

 

[EddieChen]

bloodline wrote:

cpk123 wrote:
what never made sense to me is why would you do rounding during the intermediate steps of the problem.
do the problem to the full extent of decimals - and then finally round out before marking your answer. - that is the way I would do it.
keeping # of decimals to max - which means do not round –> does not hurt you in your calculations - the calculator is doing the heavy lifting.

Except that when i did this for currency swaps, it did hurt my answers…at least as far as the CFA text book is concerned. The answer in the text book kept all intermidiary calculations to four decimal places while i left mine at five…the results was a difference of about 0.00007 which is not much, but when this is multiplied by a notional amount of 25 million, the errors become quickly magnified.
I am hoping an exam question will indicate the number of decimal places to use.

I don’t think it is a problem because usually the three choices would be very different.