Question: Consider the three-period binomial model with u D 3, d D 1=2 and r D 1=3 and S0 D 16. The European prime factor option

Consider the three-period binomial model with u D 3, d D 1=2 and r D 1=3 and S0 D 16. The European prime factor option pays off $1 for each factor in the prime factorization of the stock price at time 3 (when the option expires). For example, if the stock price is 24 D 2331, then the payoff is 4 D 3 C 1. Find the no arbitrage price of this option.

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