Kahan Summation Algorithm Accuracy - Quant Trader Interview Question
Difficulty: Medium
Category: Algorithms & Data Structures
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Topics: numerical-stability, floating-point, algorithms, precision
Problem Description
You're tasked with analyzing the accuracy of a financial model that performs a large number of floating-point additions. The model iteratively sums $n = 10^6$ numbers, each representing a small price increment. Due to the limitations of floating-point representation, naive summation can accumulate significant error.
What is the primary benefit of using Kahan summation in this scenario, compared to naive summation?
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