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Yes, it is tradition to use the full form of someone's name for the most formal occasions. A graduation is a very formal occasion. One indication of that is that you wear special ceremonial clothing?the gown and mortarboard?that is never used in other contexts.

Generally, you use the first letter of your first and the first letter of your last name as your initials, but you can also include the first letter of your middle name or maiden name, or more than one letter from one of the names (e.g. someone with the last name DiAmico using both D and A).