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Tontines
A tontine is an investment pool, in which the returns of the pool get shared among the survivors. Once popular, these then fell out of favour, and for years existed only as plot devices in novels and on television. Recently there has been a resurgence of interest in tontine-like products. A carefully designed tontine can provide stable lifetime income, without having to actually guarantee a specific payout rate. This makes them both simpler to operate and cheaper to offer than the alternatives that do guarantee a payout rate, eg life annuities. I’ll discuss some of that work, including how to optimize the payout structure. In fact, Canada is now home to two retail tontine products, one of which was shepherded through the regulatory approval process by my co-author Moshe Milevsky. I’ll discuss some of the novel design features that regulatory process led to, which are only now attracting academic scrutiny.