Single Premium of Equity-Linked with CRR and CIR Binomial Tree

Abstract

Unit-linked life insurance is a life insurance product that is a hybrid because it provides two benefits at once, life insurance benefit and investment benefit. Equity-linked is a type of unit-linked life insurance that invest premiums paid partly in shares. Some of these insurance policies include options that give the right to the policyholder to terminate their policy contract and receive some cash. In this research, we study how to determine the amount of single premium endowment equity-linked using Cox, Rubenstein, and Ross (CRR) and Cox, Ingersoll, and Ross (CIR) binomial tree. CRR binomial tree is used to predict the stock price of several period ahead, while CIR binomial tree is used to predict the interest rate. Keywords : equity-linked, single premium, binomial tree, stock price, interest rat