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
Date Written: November 5, 2009
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