In this study, a fair valuation model for an insurance contract, participating policy, is developed and validated by corporation with Monte Carlo simulation. This kind of insurance contract is evaluated in accordance with four elements: guaranteed interest, bonus policy, surrender option, and default factor. The framework of this four-element participating policy takes into account the policyholder’s desire to early exercise and the insurance company’s insolvency risks. The policyholder early exercises the contract only if the value of early-exercise is larger than that of hold-to-maturity. The default factor is also considered by setting a barrier function for the evaluation. By comparing the dynamic of the target asset and the barrier function, we decide whether the insurance company defaults or not, is decided. The valuation process of this contract is path-dependent; thereby a dynamic programming for pricing American options is used to perform Monte Carlo simulations which use a least-square approach developed by Longstaff and Schwartz in 2001. The simulation results show that the value of the improved contract, which considers both the surrender option and the default risks, is higher than that of the contract that only considers surrender option. However, the comparison between the values of improved contract and the ordinary one depends on the different setting parameters.

中文部分：
楊曉文、黃泓志、黃麗容，2003，□投資策略、清償能力與分紅保單公平定價之研究□，臺大管理論叢，17卷1期：頁91-112
林志岳，2003，□台灣投資型保險商品市場與發展□，財團法人保險事業發展中心
鄭錦聰，2003，□MATLAB程式設計□，全華科技圖書
中華民國人壽保險商業同業公會，http://www.lia-roc.org.tw
財團法人保險事業發展中心，http://www.iiroc.org.tw

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