Valuation of Life Insurance Policies with Embedded Surrender Option

Based on the insurance actuarial theory and the classic financial engineering theory,the paper analyses the value of life insurance policies with embedded surrender option,and finds out that whether the surrender option is exercised is related to several factors in a certain policy,in which the relation varies with the change of factors' value.Meanwhile two seemingly reasonable conclusions are denied.Finally the valuation of the insurance surrender option is made with no-arbitrage theory.