• Corpus ID: 55245347

Practical Valuation of Risk Transfer in Advance Pricing Agreements

  title={Practical Valuation of Risk Transfer in Advance Pricing Agreements},
  author={Zvika Afik and Yaron Lahav},
A recently published paper argues that Advance Pricing Agreements adopting the Comparable Profits Method or the Transactional Net Margin Method, overlook the risk transferred from the tested party (subsidiary) to the party related to the transaction (parent) - a shift caused by fixing the profitability of the tested party. In this paper, we propose a practical implementation methodology to estimate the model parameters and discuss the theoretical and practical reasons for our proposed method… 

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