| Summary: | 碩士 === 東海大學 === 財務金融學系 === 97 === This paper extends the model of Bacinello (2003a) to investigate the premium of a guaranteed life insurance participating policy by taking the default risk and mortality risk into account. Specifically, our model not only takes into account the presence of the surrender option, participating option, default risk and mortality risk, but also allows the recovery rate paid out in default is endogenous. Based on the result of numerical analyses, the impact of default risk on the premium of policies without surrender options is greater than the impact on policies with surrender options. It implies that policies with surrender options are better choices for policyholders when the default risk of insurers is significant. Furthermore, we also find that the impact of default risk on premiums increases as the interest rate decreases. It indicates that the default risk is an important factor for choosing policies, especially when the interest rate is low.
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