The Loan Insurance Pricing of Guaranteed Loan
Author(s): ZHANG Yaojie, SHI Benshan, ZHou Sheng, School of Economics & Management, Southwest Jiaotong University
Pages: 49-57
Year: 2015 Issue: 7
Journal: Insurance Studies
Keyword: guaranteed loan; insurance pricing; expected loss; liquidation order; asset correlation;
Abstract: The study on credit insurance pricing has made some progress in recent years,but there is still a gap on the pricing for guaranteed loan insurance. This paper considered the liquidation order of the guaranteed loan and the impacts of the debt structure of the borrower and the guarantor on loan insurance pricing. It derived the numerical solution of loan insurance pricing by calculating the expected loss of the guaranteed loan. After calculating some examples,this paper found the effect of the borrower and the guarantor’s asset correlation,volatility and yield on insurance pricing,and made some relevant policy suggestions.
Pages: 49-57
Year: 2015 Issue: 7
Journal: Insurance Studies
Keyword: guaranteed loan; insurance pricing; expected loss; liquidation order; asset correlation;
Abstract: The study on credit insurance pricing has made some progress in recent years,but there is still a gap on the pricing for guaranteed loan insurance. This paper considered the liquidation order of the guaranteed loan and the impacts of the debt structure of the borrower and the guarantor on loan insurance pricing. It derived the numerical solution of loan insurance pricing by calculating the expected loss of the guaranteed loan. After calculating some examples,this paper found the effect of the borrower and the guarantor’s asset correlation,volatility and yield on insurance pricing,and made some relevant policy suggestions.
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