What should be the top New Year’s resolution for financial modellers?
There are plenty I would like to include here, such as putting the mouse in the dustbin and reducing reliance on the IF function. However, there is one resolution that stands out above all the others and this is to abolish circular references. By that I mean all circular references, which includes switching the calculation method to iteration and using copy paste iterative macros.
The funny thing is that when I tell people that circulars should never be included, they generally agree with me, but then tell me various instances when they think circular arguments are justifiable. This doesn’t stack up. Either circulars are acceptable anywhere, or they are not.
The trouble is that too many people believe that either copy paste iterative macros or iteration are necessary. Why? Probably because they were told this on a course or by someone in authority (“I was taught to do this on X’s graduate training programme” or “but experienced modellers use copy paste iterative macros” are common comments). My mission is to debunk these myths.
Why does this matter? Well, why would anybody prefer a convoluted black box with a high risk of error over a logical financial model which can give instant results for a range of cases?
Yes, sometimes it is hard to spot the circular and fix the problem but all it needs is discipline, a logical mindset and proper training.
For further details on circular references, please click here