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A snakes and ladders representation of stock prices and returns

Published online by Cambridge University Press:  23 January 2015

Philip C. Gager  and
Mark B. Shackleton
Philip C. Gager
Affiliation:
University of Cumbria, Lancaster LA1 3JD e-mail:[email protected]
Mark B. Shackleton
Affiliation:
Lancaster University Management School, Lancaster LA1 4YX e-mail:[email protected]
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Extract

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 determine fair values of a multistage project that pays fixed dividends at uncertain completion times and has random returns

Type
Articles
Information
The Mathematical Gazette , Volume 95 , Issue 533 , July 2011 , pp. 177 - 185
Copyright
Copyright © The Mathematical Association 2012

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References

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