What is CAPM and in which set of TP analytics can this model be applied?

Transfer Pricing
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Michael Kalson, PhD
The CAPM is a financial model that predicts the expected return on an asset as a function of changes in the return on the market portfolio and a risk coefficient (“beta”) that measures the degree to which shifts in the market portfolio influence the returns on the particular asset under consideration. It can be useful in determining arm’s length remuneration for intra-group services that reflects the risks borne by the provider(s), and for making any necessary TP adjustments.

For instance, in a recent case involving Motorola, an Indian branch performed advertising, marketing and promotion activities for its parent, and it is alleged that its remuneration was greater than arm’s length. Motorola used the CAPM to quantify the risk to support their case that the risks involved in their activities justify the above-arm's length price they received for their services.
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