A Snakes and Ladders Representation of Stock Prices and Returns

Gager, Philip C.; Shackleton, Mark B.

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A Snakes and Ladders Representation of Stock Prices and Returns

The Mathematical Gazette, Vol. 95, No. 533, July 2011

12 Pages Posted: 5 Nov 2009 Last revised: 12 May 2011

See all articles by Philip C. Gager

Mark B. Shackleton

Lancaster University - Department of Accounting and Finance

Date Written: November 5, 2009

Abstract

Snakes and ladders is an ancient Indian game of chance that offers amusement as well as a metaphor for life's many ups and downs. Games offer useful and fun ways of conveying ideas as well as solution techniques and this game has considerable mathematical tractability. This note shows how snakes and ladders can be used to represent the ups and downs of share ownership and solve for fair values of a multistage project that pays fixed dividends at uncertain completion times and has random returns.

Keywords: game and net present valuation, Markovian and Matrix methods

JEL Classification: C00

Suggested Citation: Suggested Citation

Gager, Philip C. and Shackleton, Mark B., A Snakes and Ladders Representation of Stock Prices and Returns (November 5, 2009). The Mathematical Gazette, Vol. 95, No. 533, July 2011, Available at SSRN: https://ssrn.com/abstract=1500431