Econometric Fragility in the Pricing of Complex Intra-Group Financial Instruments

Abstract

Transfer pricing disputes involving complex intra-group financial instruments are often presented as disagreements about comparable selection or method choice. This article argues that the deeper source of controversy is frequently different: the numerical outputs produced by standard benchmarking techniques depend materially on assumptions that remain implicit and undisclosed. Credit spreads, rating mappings, optionality adjustments and the construction of arm’s length range each function as estimation choices that carry sampling variance and model sensitivity. Drawing on the factual background of a recent French dispute involving intra-group convertible bonds – Conseil d’État, 17 December 2025, No. 491165 – the article shows how a disagreement that appears to be about a rate differential is in substance a disagreement between competing implicit models. It then proposes a framework of assumption disclosure and sensitivity testing as a practical response, with implications for transfer pricing documentation, audit defence and OECD policy.