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Open Access 2022 | Open Access | Buch

How to Build a Modern Tontine

Algorithms, Scripts and Tips

verfasst von: Moshe Arye Milevsky

Verlag: Springer International Publishing

Buchreihe : Future of Business and Finance

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

Inhaltsverzeichnis

Über dieses Buch

This open access book introduces the modern tontine and its applications in retirement and decumulation. Personal financial management in the later stages of life presents unique challenges, and renowned retirement planning expert Dr. Milevsky proposes the modern tontine as a solution. With the goal of guiding professionals and retirees in more efficient decumulation, the book demonstrates how to build a modern tontine. It is technically oriented, employing a cookbook format, featuring R code, and examining retirement planning through a statistical lens. This how-to guide, which is a sequel to his 2020 book “Retirement Income Recipes in R”, will be invaluable for retirement planning professionals and advisors, as well as for PhD scholars in retirement planning, quantitative finance, and related fields.
This book is open access.

Inhaltsverzeichnis

Frontmatter

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1. Why Tontines? Why Now?

Abstract

In this chapter I provide some background on the reasons (I think) a traditional fund company might want to introduce a modern tontine as it relates to the unique challenges that people face managing their financial affairs towards the end of the human lifecycle.

Moshe Arye Milevsky

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2. Financial and Actuarial Background

Abstract

This chapter summarizes the main technical background on financial and actuarial modelling required, with particular emphasis on present values, stochastic investment returns, the Gompertz law of mortality and the valuation of temporary life annuities which are very close cousins to modern tontines. To be clear, this chapter is a review of background and notation. It’s definitely not the place to visit to learn anything new.

Moshe Arye Milevsky

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3. Building a Tontine Simulation in R

Abstract

In this chapter I explain the core of the (basic, version 1.0) modern tontine simulation algorithm and provide R-scripts that can be used to generate forecasted values for what I have called the Modern Tontine (MoTo) Fund.

Moshe Arye Milevsky

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4. Statistical Risk Management

Abstract

In this chapter I dig deeper into the results from the (very basic) simulation presented in the prior chapter so users can develop a more sophisticated sense of the drivers of the outcomes. Along the way I will introduce summary metrics that can quickly and easily represent the thousands of possible data points using key dashboard metrics for the dividends and fund values. I will also examine the mortality assumptions and dig deeper into some what if questions and broader risk management issues.

Moshe Arye Milevsky

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5. Death Benefits, Refunds and Covenants

Abstract

This chapter implements a design feature in which investors in the modern tontine are assured they will be made whole if they happen to die prior to receiving their original investment back in periodic payments. This is the symmetric equivalent of a cash-refund income annuity, which incidentally is the most popular rider in the US market.

Moshe Arye Milevsky

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6. Goodbye LogNormal Distribution

Abstract

The R-scripts presented and developed in the prior chapters assumed an investment return generating process that is both static and LogNormal, via the basic rnorm() function. Indeed, had this work been done in the 1970s, or perhaps the 1670s when national (versus natural) tontines were first launched, that might have been sufficient.

Moshe Arye Milevsky

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7. Squeezing the Most from Mortality

Abstract

The R-scripts and numerical results in the prior chapters assumed that investors in the modern tontine live and die by the famous Benjamin Gompertz (1825) model of mortality.

Moshe Arye Milevsky

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8. Managing a Competitive Tontine Business

Abstract

This chapter reviews some practical business issues that sponsors of a modern tontine might encounter when launching this venture, with particular emphasis on the competitive pressures from offering a non-guaranteed solution, the regulatory issues around the provision of securities versus insurance and some other administrative matters that might arise.

Moshe Arye Milevsky

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9. Solutions and Advanced Hints

Abstract

This chapter contains high-level solutions to the end-of-chapter Test Yourself questions together with some advanced hints on how to get your R-scripts to run faster, smoother and with greater efficiency.

Moshe Arye Milevsky

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10. Concluding Remarks: Tontine Thinking

Abstract

This concluding chapter of the book How to Build a Modern Tontine reviews the main rationale and objectives, provides a summary of the modern tontine mechanics and discusses some of the constraints imposed by its unique regulatory structure.

Moshe Milevsky

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11. Correction to: Concluding Remarks: Tontine Thinking

Moshe Milevsky

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Titel: How to Build a Modern Tontine
verfasst von: Moshe Arye Milevsky
Verlag: Springer International Publishing
Electronic ISBN: 978-3-031-00928-0
Print ISBN: 978-3-031-00927-3
DOI: https://doi.org/10.1007/978-3-031-00928-0