Rounding: Pre or Post Netting?

[clarkth4]

Futures Contract Rounding:
When increasing/decreasing duration and the overall allocation to equity and bonds, sometimes multiple contact purchase orders are used - and subsequently netted. Here’s an example of the issue at hand
Buy 14.2 contracts rounded to 14 (to increase allocation to bonds)
Buy 25.3 rounded to 25 contracts (to increase duration of portfolio)
Net (14 +15) buy 39 contracts
But, if you add the unrounded contracts together you get 39.5 which rounds to 40 contracts. Thoughts on the correct answer and the probability of seeing this evil?
Lastly, be on the lookout for an updated “Adventures of Cobb Douglas” post…

 

[tribeca_regent]

Use equity futures to change portfolio allocations (bond/equity) and use bond futures to change portfolio duration. Using bond futurs for both steps will change portfolio durations.

 

[S2000magician]

On the exam, you’ll get full credit whether you round before or after netting.
Don’t worry about it.