Gager, P and Shackleton, M B (2009) A snakes and ladders representation of stock prices and returns. Working Paper. The Department of Accounting and Finance, Lancaster University.
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.
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