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They probably just accumulate the rounding errors into an account and write it off periodically without even realising why it happens.
by jhugo 5y ago
They probably just accumulate the rounding errors into an account and write it off periodically without even realising why it happens.
- bidirectional 5y agoNo, it's just that we're in the realm of predictions and modelling, not accounting. If you're constructing a curve to forecast 50 years of interest rates from a limited set of instruments, you're already accepting a margin of error orders of magnitude greater than the inaccuracies introduced by floating point. The models also use transcendental functions which cannot be accurately calculated with fixed point, rationals, integers etc.
- jhugo 5y agoMakes sense; I wasn't aware of the meaning of "front office" as a term of art in finance.
- BruiseLee 5y agoIt's not like decimal or fixed point does not suffer from rounding errors either. In fact for many calculations, binary floating point gives more accurate answers. In accounting there are specific rules that require decimal system, so one must be very careful with the floating point if it is used.