On Numerical (in)stability of Recursive Present Value Computation Method
نویسنده
چکیده
We show that the recursive computation scheme of present value (PV), which is used implicitly in FAS 91 accounting standard, is numerically unstable and that the absolute error increases exponentially for positive discount rates. We show that reversing the direction of calculations in the recurrence equation yields a robust PV computation routine.
منابع مشابه
On numerical stability of recursive present value computation method
We analyze numerical stability of a recursive computation scheme of present value (PV) amd show that the absolute error increases exponentially for positive discount rates. We show that reversing the direction of calculations in the recurrence equation yields a robust PV computation routine.
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