Book Review: "How To Build a Modern Tontine: Scripts, Tips and Algorithms"
We were excited to read another fantastic book from Professor Moshe Arye Milevsky. Like all of his books, this one is highly recommended.
How To Build a Modern Tontine describes in detail how to model a simple modern tontine arrangement. It begins convincingly by exploring why modern tontines make sense and why their time is now. After a brief review of the fundamental financial and actuarial principles, the book then dives into a coding example using the R programming language of a simple tontine simulation model and a discussion of how various parameters affect the results. It then discusses the tradeoffs (and in some cases, the perils!) of introducing various types of options into the design. And like any good professor, he provides a list of "Test Yourself" questions throughout, followed later by the solutions.
The book also highlights several implementation challenges, such as regulatory hurdles and operational complexities. Consider this quote, for example:
“For most of the prior chapters, the given R-script has assumed an initial time-zero pool size of GL0, with each member contributing and investing exactly f0 dollars, and each participant assumed to be precisely of age x. These assumptions have been extremely convenient for the modeling and simulation projections, but in practice are highly unrealistic. … So, if I have convinced you that this mixing cohorts is economically complicated, requires a complete re-write of the R-script and must be done with utmost caution that was exactly my intention. More to the point, what I have just described goes beyond the scope of this (free) book. But the computational labour involved isn’t insurmountable, and the theory itself has been formulated by many of the researchers I highlighted in the literature review of Chap. 1. It can be done, but not here and not now.”
Solving these real-world regulatory and operational issues is the reason that Nuovalo exists! Our LifePool℠ platform handles all the computational labour for you, here and now.
Nuovalo is honored that our CEO, Richard Fullmer, and our advisor/co-author, Michael Sabin, were listed in the book by professor Milevsky in the section titled "Tontine Literature: What (and Who) Else to Read."
How To Build a Modern Tontine is a wonderfully insightful text, and will be especially useful to those who want to model how tontines work under simplifying assumptions and to understand the basic tradeoffs of various design decisions.
But to fully design, build, and operate one in practice requires highly specialized practical expertise. For this, partner with the experts at Nuovalo.