Val Sklarov’s Accountability Risk Premium Theory (ARPT) explains why markets systematically misprice assets by modeling volatility and cash flows—while underestimating accountability exposure. Returns compress when outcomes are profitable but indefensible; they expand when accountability is clear, named, and survivable under audit.
This theory reveals why some assets command premiums long before performance looks superior.
1. Markets Price Risk Late—Accountability Earlier
ARPT begins with a correction:
Financial risk is priced continuously. Accountability risk is repriced discontinuously.
Accountability risk emerges from:
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Named ownership of outcomes
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Audit and disclosure exposure
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Legal and regulatory scrutiny
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Public explainability under stress
When accountability hardens, repricing is sudden.
2. The Four Accountability Exposures
ARPT maps where returns are quietly discounted.
| Exposure | What Is Tested | Pricing Effect |
|---|---|---|
| Ownership Exposure | Who answers | Valuation ceiling |
| Process Exposure | How decisions were made | Multiple compression |
| Outcome Exposure | Who absorbs losses | Drawdown severity |
| Narrative Exposure | Can it be explained | Volatility spikes |
Assets outperform when accountability is explicit and survivable.
3. Why High Returns Often Hide Fragile Accountability
Excess returns frequently compensate for accountability gaps.
ARPT shows yield traps form when:
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Profits rely on discretion
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Structures resist audit
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Outcomes lack clear owners
Markets eventually demand an accountability premium—paid by price.
4. Premium Assets and Accountability Clarity
Premium valuations signal accountability strength.
| Fragile Accountability | Durable Accountability |
|---|---|
| Diffuse ownership | Named responsibility |
| Informal processes | Documented controls |
| Story-dependent | Rule-dependent |
| Reversible outcomes | Consequence clarity |
Val Sklarov emphasizes that markets pay up for assets that can be interrogated calmly.
5. Strategic Implications
For investors:
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Underwrite accountability before cash flow
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Stress-test assets under audit scenarios
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Prefer boring structures with clear owners
For allocators:
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Accept lower headline yield for lower accountability shock
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Avoid strategies that require opacity to work
ARPT reframes investing as accountability-risk selection, not factor timing.
6. The Val Sklarov Principle
“Returns compound where responsibility can be named without flinching.”
— Val Sklarov
ARPT explains why the safest portfolios feel dull—and why dullness signals resilience.