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ENERGY RISK PROFESSIONAL

2019

ERP ®

Study Guide
The world’s most highly
respected designation
for risk management
professionals
2019 Energy Risk Professional (ERP®) Study Guide

2019 Energy Risk Professional (ERP®)


Exam Study Guide

ENERGY RISK PROFESSIONAL Each year, we invite Certified ERPs from a variety of
(ERP®) PROGRAM disciplines and geographies to participate in the exam
The ERP certification is the world’s first and only development process. Our dual collaboration with EOC
internationally recognized designation developed by members and certified ERP alumni ensures that
energy professionals, for energy professionals, to assess the ERP Exam and curriculum remain consistent with
and validate energy professional knowledge and skills. It current industry practice.
objectively assesses and validates candidates’ skills and
knowledge of the tools used to manage and measure 2019 ERP LEARNING OBJECTIVES
energy risk. Certified ERPs can apply knowledge about AND STUDY GUIDE
the production, transportation, and storage of physical The 2019 ERP Learning Objectives and 2019 Study
energy commodities; structure and practical application Guide are valuable exam tools that candidates should
of energy derivatives; assessment of energy market data reference frequently when preparing for the Exam.
and price modeling; and identification, measurement, Each exam question is developed from and directly
and management of risk in the energy industry. references a specific reading and related learning
objective. Candidates are expected to be familiar
ERP CURRICULUM with the learning objectives and be able to apply the
Development of the ERP exam curriculum is guided by principles on the Exam.
GARP’s Energy Oversight Committee (EOC), a panel of
senior practitioners and academics with energy market 2019 ERP STUDY GUIDE CHANGES
experience and risk management expertise. The exam Returning 2018 ERP candidates should also review
topics and required readings listed in the 2019 ERP the 2019 ERP Study Guide Changes. This document
Study Guide and 2019 Learning Objectives (LOBs) summarizes all readings removed from the 2018
are updated annually in conjunction with the EOC to curriculum and includes new readings added for 2019.
ensure the ERP Exam remains a timely and accurate
assessment of the knowledge and skills required of COMMONLY-USED CONTRACT
energy market and risk professionals. SPECIFICATIONS
Exchange-traded energy commodity futures and option
ERP EXAM contracts are typically transacted in standardized lot
The ERP Exam Part I and Part II evaluate a candidate’s sizes. Unless otherwise noted, exam questions will
knowledge of key concepts aligned with the topics below: assume the following standard volumetric terms:
• Crude Oil:
ERP EXAM PART I | 80 QUESTIONS 1,000 barrels (equal to 42,000 gallons) per contract
• Crude Oil and Refined Products Markets • Gasoline futures:
• Natural Gas and Coal Markets 42,000 gallons per contract
• LNG Market Fundamentals • ULSD futures:
• Electricity Markets (includes Renewables Generation) 42,000 gallons per contract
• Gasoil (diesel) futures:
ERP EXAM PART II | 60 QUESTIONS
100 metric tons (MT) per contract
• Measure and Model Market Risk
• Natural gas (Henry Hub) futures:
• Measure and Model Credit/Liquidity Risk
10,000 MMBtu per contract
• Apply Financial Energy Products to Model Risk
• Risk Governance, ERM, and Capital Planning

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2019 Energy Risk Professional (ERP®) Study Guide

COMMONLY-USED ABBREVIATIONS AND ACRONYMS


The following is a list of commonly used abbreviations and acronyms that appear in the LOBs and that may
appear on the Exam:

• Bbl: Barrel of ____________ • KPI: Key performance indicators


• BOE: Barrel of oil equivalent • KRI: Key risk indicators
• BTU: British Thermal Unit • kW: Kilowatt
• CCP: Central counterparty • kWh: Kilowatt-hour
• CDD: Cooling degree days • LMP: Locational marginal pricing
• Cf: Cubic feet • LNG: Liquefied natural gas
• CFD: Contract for Differences • LSE: Load serving entity
• CFR: Cost and Freight • Mcf: Million cubic feet
• CIF: Cargo, Insurance, and Freight • MMBtu: Million British Thermal Units
• CIP: Cargo and Insurance Paid • MT: Metric ton
• CPT: Carriage Paid to all Transport • MtM: Mark-to-market
• CRO: Chief Risk Officer • MW: Megawatt
• CSA: Credit Support Annex • MWh: Megawatt-hour
• CVA: Credit value adjustment • NGL: Natural gas liquid
• DA: Day-ahead • NOC: National oil company
• DAP: Delivered at Place • NPV: Net present value
• DAT: Delivered at Terminal • NYMEX: New York Mercantile Exchange
• DDP: Delivered Duty Paid • OPEC: Organization of the Petroleum
• DES: Delivered Ex Ship Exporting Countries
• EFP: Exchange for physicals • OTC: Over-the-counter
• EIA: (US) Energy Information Agency • PFE: Potential future exposure
• ERM: Enterprise risk management • PPA: Power purchase agreement
• ETS: Emissions trading system • PSA: Production sharing agreement
• EWMA: Exponentially weighted moving average • PTR: Physical transmission right
• EXW: Ex-Works • PV: Photovoltaic installation (solar)
• FAS: Free Alongside Ship • PSC: Production services contract
• FOB: Free On Board • RAROC: Risk-adjusted return on capital
• FTR: Financial transmission right • RBOB: Reformulated gasoline blendstock for
• GARCH: Generalized auto-regressive oxygen blending
conditional heteroskedasticity • RCSA: Risk control self-assessment
• HDD: Heating degree days • RTO: Regional Transmission Organization
• ICE: Intercontinental Exchange • SMP: System marginal price
• IEA: International Energy Agency • ULSD: Ultra-low sulfur diesel
• IOC: International oil company • VaR: Value-at-risk
• IRR: Internal rate of return • VOLL: Value of lost load
• ISDA: International Swaps and Derivatives • VPP: Volumetric production payment
Association • WACC: Weighted average cost of capital
• ISO: Independent System Operator • WTI: West Texas Intermediate crude oil
• JCC: Japan customs cleared (oil price)

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

ERP EXAM PART I


CRUDE OIL AND REFINED PRODUCTS MARKETS

NATURAL GAS AND COAL MARKETS

LNG MARKET FUNDAMENTALS

ELECTRICITY MARKETS
(INCLUDES RENEWABLES GENERATION)

ERP EXAM PART II


MEASURE AND MODEL MARKET RISK

MEASURE AND MODEL CREDIT/LIQUIDITY RISK

APPLY FINANCIAL ENERGY PRODUCTS TO MANAGE RISK

RISK GOVERNANCE, ERM, AND CAPITAL PLANNING

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

ERP EXAM PART I


ERP EXAM PART I

The four-hour ERP Exam Part I consists of 80 multiple choice questions. The exam structure has been designed in
conjunction with the EOC to assess learning outcomes associated with the physical energy commodity markets based
on the following topics and weights:

Crude Oil Markets and Refined Products 30% 24 questions


Natural Gas and Coal Markets 25% 20 questions
LNG Market Fundamentals 10% 8 questions
Electricity Markets (includes Renewables Generation) 35% 28 questions

ERP Exam Part I Total 100% 80 questions

Crude Oil Markets and Refined Products


PART I EXAM WEIGHT | 30%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Crude Oil Markets and Refined Products
include the following:

• Physical properties of crude oil


• Crude oil grades
• Unconventional crude oils
• Global benchmarks
• Economic fundamentals
• Exploration and production
• Reserve identification
• Project development
• Fiscal regimes
• Oil and gas lending and collateral evaluation
• Economics of production
• Transportation and storage economics
• Crude oil refining
• Distillation, blending, and other refining processes
• Refinery complexity
• Refining margins and their determinants
• Finished products and specifications

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

READINGS FOR CRUDE OIL MARKETS AND REFINED PRODUCTS | 24 QUESTIONS


ERP EXAM PART I

1. Andrew Inkpen and Michael H. Moffett. The Global Oil and Gas Industry: Management, Strategy and
Finance. (Tulsa, OK: PennWell Books, 2011).
• Chapter 3. Access, Leasing, and Exploration
• Chapter 4. Developing Oil and Gas Projects
• Chapter 5. Production of Oil and Gas Products
• Chapter 10. The Market for Crude Oil
• Chapter 12. Refining

2. The International Council on Clean Transportation, An Introduction to Petroleum Refining and the
Production of Ultra Low Sulfur Gasoline and Diesel Fuel. (MathPro, Oct 2011).*

3. Charlotte Wright, Fundamentals of Oil & Gas Accounting, 6th Edition. (Tulsa, OK: PennWell Books, 2017).
• Chapter 15. Conveyances (to page 582 only)
• Chapter 17. Reserve Valuation
• Chapter 18. Accounting for International Petroleum Operations

4. Vincent Kaminski, Energy Markets. (London, UK: Risk Books, 2012).


• Chapter 16. Oil Transportation and Storage
• Chapter 17. Oil Pricing

5. Owain Johnson, The Price Reporters. (London, UK: Routledge, 2018).


• Chapter 3. How Price Benchmarks Work
• Chapter 11. PRA Pricing Methodologies
• Chapter 12. Market-on-Close
• Chapter 15. PRA and European Regulation

6. Incoterms 2010, Australian Customer and Border Protection Service (Australian Customer and Border
Protection Service, 2010).*

7. How Pipelines Make the Oil Market Work: Their Networks, Operation, and Regulation. (Allegro Energy
Group, December 2001).*

8. Oil and Gas Exploration and Production Lending, (Office of the Comptroller of the Currency, March
2016).*

*This reading is freely available on the GARP website.

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

Natural Gas and Coal Markets


ERP EXAM PART I

PART I EXAM WEIGHT | 25%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Natural Gas and Coal Markets include
the following:

NATURAL GAS
• Physical properties of natural gas
• Types of natural gas, units of measure, and heat content
• NGLs and condensates
• Global natural gas markets and economic fundamentals
• Market dynamics and pricing
• Gas sales agreements and trading
• Transportation and storage economics

COAL
• Physical properties of coal
• Types of coal, units of measure, and heat content
• Benchmarks, contract specifications, and trading
• Global coal markets and economic fundamentals
• Transportation

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

READINGS FOR NATURAL GAS AND COAL MARKETS | 20 QUESTIONS


ERP EXAM PART I

1. Vincent Kaminski, Managing Energy Price Risk, 4th Edition. (London, UK: Risk Books, 2016).
• Chapter 12. Coal

2. Jane Nakano and Sarah Ladislaw, A Tale of Three Coal Markets: US, China, and India. (Center for
Strategic & International Studies, 2018).*

3. Richard Lassander and Glen Swindle, Natural Gas Trading in North America. (Princeton, NJ: Scoville
Risk Partners, 2018).
• Chapter 3. Natural Gas Markets
• Chapter 4. Supply and Demand
• Chapter 5. Storage and Transport
• Chapter 8. Basis Markets (pages 158-176 only)

4. Leffler, William, Natural Gas Liquids: A Non-Technical Guide. (Tulsa, OK: PennWell. 2014).
• Chapter 6. Refineries and the Unnatural Gas Liquids
• Chapter 7. Logistics
• Chapter 8. NGL Markets - Petrochemicals
• Chapter 9. NGL Markets - Fuels

5. Anthony J. Melling, Natural Gas Pricing and its Future: Europe as the Battleground. (Carnegie
Endowment, 2010).*
• Chapter 1. The Development of European Gas Contracting
• Chapter 2. The Dynamics Between Oil-Indexed and Spot Prices
• Appendix. Key Terms of Long-Term Oil-Indexed Take-or-Pay Contracts

6. Jonathan Stern and Howard Rogers, The Dynamics of a Liberalised European Gas Market – Key
Determinants of Hub Prices, and Roles and Risks of Major Players. (Oxford Energy, December 2014).
(Sections 1.1 to 1.4 only).*

7. Chris Le Fevre, Gas Storage in Great Britain. (Oxford Energy, January 2013).*
• Chapter 2. The Role of Gas Storage

*This reading is freely available on the GARP website.

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

LNG Market Fundamentals


ERP EXAM PART I

PART I EXAM WEIGHT | 10%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to LNG Market Fundamentals include
the following:

• LNG
• Market dynamics and pricing
• Contracts and shipping

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

READINGS FOR LNG MARKET FUNDAMENTALS | 8 QUESTIONS


ERP EXAM PART I

1. Michael D. Tusiani and Gordon Shearer, LNG: Fuel for a Changing World - A Nontechnical Guide,
2nd Edition (Tulsa, OK: PennWell Books, 2016).
• Chapter 12. LNG Project Formation
• Chapter 13. Upstream Gas Supply Agreements
• Chapter 14. LNG Sale and Purchase Agreements
• Chapter 15. LNG Tanker Contracts

2. Perspectives on the Development of LNG Market Hubs in the Asia Pacific Region. (US Energy Information
Administration, March 2017)*

*This reading is freely available on the GARP website.

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

Electricity Markets
ERP EXAM PART I

(includes Renewables Generation)


PART I EXAM WEIGHT | 35%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Electricity Markets (includes Renewables
Generation) include the following:

• Physical properties of electricity


• Types of power generation (fossil fuel and renewable)
• Transmission and distribution
• Electricity market economics
• Base load, mid-merit, peak, and off-peak generation
• Capacity factor, heat rate, and spark spread
• Market data and price discovery
• Investing in generating capacity
• Electric energy markets and trading
• Power pools (ISOs and RTOs) and bilateral trading
• Contracts and structured solutions for energy markets
• Liberalized (deregulated) wholesale power market design
• Energy markets (day-ahead vs. real-time) and balancing markets
• Energy only vs. capacity markets
• Ancillary services
• Integration of renewable energy
• Global electricity markets and economic fundamentals
• Emission reduction programs and regulation

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part I

READINGS FOR ELECTRICITY MARKETS


ERP EXAM PART I

(INCLUDES RENEWABLES GENERATION) | 28 QUESTIONS

1. John E. Parsons, Introduction to Electricity Markets. (Jersey City, NJ: GARP, September 2017)
• Chapter 1. Industry Overview
• Chapter 2. Load
• Chapter 3. Generation
• Chapter 4. Transmission
• Chapter 5. Economic Optimization of the System
• Chapter 6. Bilateral Contracts and Trading
• Chapter 7. Centralized Markets for Energy
• Chapter 8. Other Electricity Markets
• Chapter 9. Emissions Markets

2. Rafal Weron, Modeling and Forecasting Electricity Loads and Prices. (Hoboken, NJ: John Wiley &
Sons, 2006).
• Chapter 1. Complex Electricity Markets

3. Kenneth Skinner, Heat Rates, Spark Spreads and the Economics of Tolling Agreements. (Hoboken, NJ:
John Wiley & Sons, December 2010).*

4. Quadrennial Technology Review 2015. Chapter 4: Technology Assessments – Solar Power Technologies.
(US Department of Energy, 2015).*

5. Rebecca Busby, Wind Power: The Industry Grows Up. (Tulsa, OK: PennWell Books, 2012).
• Chapter 6. Wind Farms: Developing and Operating Wind Power Plants

6. International Renewable Energy Agency (IRENA), Renewable Energy Integration in Power Grids
(April 2015).*

7. The World Bank, Financing Renewable Energy: Options for Developing Financing Instruments Using Public
Funds. (April 2015).*

8. KU Leuven Energy Institute, The Current Electricity Market Design in Europe. (2015).*

9. KU Leuven Energy Institute, Capacity Mechanisms. (2013).*

10. KU Leuven Energy Institute, Negative Electricity Market Prices. (2014).*

11. KU Leuven Energy Institute, Storage Technologies for the Power System. (2014).*

12. KU Leuven Energy Institute, Cross-Border Electricity Trading: Towards Flow-Based Market Coupling. (2015).*

13. German Federal Ministry for the Environment, Emissions Trading Basic Principles and Experiences in Europe
and Germany. (November 2016).*

14. World Economic Forum, The Future of Electricity New Technologies Transforming the Grid Edge.
(March 2017).*

*This reading is freely available on the GARP website.

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

ERP EXAM PART II


ERP EXAM PART II

The four-hour ERP Exam Part II consists of 60 multiple choice questions. The exam structure has been designed in
conjunction with the EOC to assess learning outcomes associated with financial energy products; probability, statistics,
data analysis and energy price modeling, and the identification, measurement, and management of energy market,
counterparty credit, and operational risks, based on the following topics and weights:

Measure and Model Market Risk 30% 18 questions


Measure and Model Credit/Liquidity Risk 30% 18 questions
Apply Financial Energy Products to Manage Risk 25% 15 questions
Risk Governance, ERM, and Capital Planning 15% 9 questions

ERP Exam Part II Total 100% 60 questions

Measure and Model Market Risk


PART II EXAM WEIGHT | 30%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Measure and Model Market Risk
include the following:

• Value-at-Risk (VaR) and other risk measures


• Liquidity risk and liquidity-adjusted VaR
• Expected shortfall
• Risk metrics associated with option contracts (“Greeks”)
• Delta-gamma hedging
• Quantitative tools for risk analysis
• Probability theory
• Statistics
• Regression analysis
• Energy commodity price formation
• Fundamental drivers
• Technical properties and time series analysis
• Modeling energy prices
• Correlation and volatility estimation
• Forecasting electricity demand
• Modeling risk management

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

READINGS FOR MEASURE AND MODEL MARKET RISK | 18 QUESTIONS


ERP EXAM PART II

1. Michael Miller, Mathematics and Statistics for Financial Risk Management, 2nd Edition. (Hoboken, NJ: John
Wiley & Sons, Inc., 2013).
• Chapter 2. Probabilities
• Chapter 3. Basic Statistics (Averages - Kurtosis only)
• Chapter 4. Distributions (Parametric - Student’s t Distribution only)
• Chapter 10. Linear Regression Analysis

2. John C. Hull, Risk Management and Financial Institutions, 5th Edition. (Hoboken, NJ: John Wiley &
Sons, 2015).
• Chapter 8. How Traders Manage Risk
• Chapter 10. Volatility
• Chapter 12. Value-at-Risk and Expected Shortfall
• Chapter 24. Liquidity Risk
• Chapter 25. Model Risk Management

3. Les Clewlow and Chris Strickland, Energy Derivatives: Pricing and Risk Management. (Sydney, AUS:
Lacima Publications, 2000).
• Chapter 2. Understanding and Analyzing Spot Prices
• Chapter 3. Volatility Estimation in Energy Markets (Sections 3.1 and 3.2 only)
• Chapter 10. Value-at-Risk

4. Rafal Weron, Modeling and Forecasting Electricity Loads and Prices. (Hoboken, NJ: John Wiley &
Sons, 2006).
• Chapter 2. Stylized Facts of Electricity Loads and Prices (Sections 2.1 to 2.4, and 2.7 only)
• Chapter 3. Modeling and Forecasting Electricity Loads

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

Measure and Model Credit/Liquidity Risk


ERP EXAM PART II

PART II EXAM WEIGHT | 30%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Measure and Model Credit/Liqudity Risk
include the following:

LIQUIDITY RISK
• Liquidity risk management
• Liquidity stress testing
• Contingency funding planning

CREDIT AND COUNTERPARTY RISK


• Credit risk measurement
• Credit ratings and scoring
• Counterparty risk measurement and management
• Expected loss, loss given default, and probability of default
• Collateralization and netting agreements
• ISDA Master and Credit Support Annex
• Credit exposure metrics and exposure profiles
• Credit valuation adjustment (CVA)
• Country and sovereign risk metrics and management
• Political, economic, social, and security risks
• Financial market indicators

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

READINGS FOR MEASURE AND MODEL CREDIT/LIQUIDITY RISK | 18 QUESTIONS


ERP EXAM PART II

1. Jon Gregory, The xVA Challenge: Counterparty Credit Risk, Funding, Collateral and Capital, 3rd Edition.
(Hoboken, NJ: John Wiley & Sons, 2015).
• Chapter 4. Counterparty Risk (Sections 4.1 to 4.3 only)
• Chapter 5. Netting, Close-Out, and Related Aspects
• Chapter 6. Collateral (Sections 6.1 to 6.6 only)
• Chapter 7. Credit Exposure and Funding (Sections 7.1 to 7.4 only)
• Chapter 14. Credit Value Adjustment (Sections 14.1 to 14.2.8 only)
• Chapter 17. Wrong-Way Risk (Sections 17.1 to 17.2.4 only)

2. Markus Burger, Bernhard Graeber, and Gero Schindlmayr, Managing Energy Risk: An Integrated View on
Power and Other Energy Markets, 2nd Edition. (Hoboken, NJ: John Wiley & Sons, 2014).
• Chapter 3. Risk Management (Section 3.4, Credit Risk only)

3. Aswath Damodaran, Country Risk Determinants, Measures and Implications – 2018 Edition (July 2018).
(pages 1 to 39 only).*

4. Shyam Venkat and Stephen Baird, Liquidity Risk Management – A Practitioner’s Perspective. (Hoboken,
NJ: John Wiley & Sons, 2016).
• Chapter 3. Liquidity Stress Testing
• Chapter 7. Contingency Funding Planning

*This reading is freely available on the GARP website.

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

Apply Financial Energy Products


ERP EXAM PART II

to Manage Risk
PART II EXAM WEIGHT | 25%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Apply Financial Energy Products to
Manage Risk include the following:

• Hedging mechanics and cash flows


• Energy derivative contracts
• Forwards and futures
• Swaps
• Options and real options
• Structure and operation of OTC and exchange markets
• Central clearing
• Physical energy commodity markets
• Pricing benchmarks
• Fundamental price drivers
• Time spreads
• Basis markets and hedging locational basis risk
• Physically-versus financially-settled transactions

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

READINGS FOR APPLY FINANCIAL ENERGY PRODUCTS TO MANAGE RISK | 15 QUESTIONS


ERP EXAM PART II

1. Jon Gregory, Central Counterparties. (West Sussex, UK: John Wiley & Sons, 2014).
• Chapter 2. Exchanges, OTC Derivatives, DPCs and SPVs (Sections 2.1 and 2.2 only)
• Chapter 3. Basic Principles of Central Clearing

2. Robert McDonald, Derivatives Markets, 3rd Edition. (Upper Saddle River, NJ: Pearson Education, Inc.,
2013).
• Chapter 4. Introduction to Risk Management
• Chapter 6. Commodity Forwards and Futures (Sections 6.1 to 6.3, and 6.6 to 6.8 only)

3. Vincent Kaminski, Energy Markets. (London, UK: Risk Books, 2013).


• Chapter 11. US Natural Gas Markets
• Chapter 18. Transactions in the Oil Markets

4. Betty J. Simkins and Russell E. Simkins, eds, Energy Finance and Economics: Analysis and Valuation, Risk
Management, and the Future of Energy. (Hoboken, NJ: John Wiley & Sons, 2013).
• Chapter 11. Real Options and Applications in the Energy Industry

5. S. Mohamed Dafir and Vishnun N. Gajjala, Fuel Hedging and Risk Management. (Hoboken, NJ:
John Wiley & Sons, 2016).
• Chapter 2. Major Energy Consumers and the Rationale for Fuel Hedging
• Chapter 4. Shipping and Airlines – Basics for Fuel Hedging

6. Richard Lassander and Glen Swindle, Natural Gas Trading in North America. (Princeton, NJ: Scoville Risk
Partners, 2018).
• Chapter 6. Price Level Trading
• Chapter 7. Time Spreads
• Chapter 8. Basis Markets (pages 176 to 196)

7. Glen Swindle, Valuation and Risk Management in Energy Markets. (Cambridge University Press, 2014).
• Chapter 2. Forwards and Carry

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

Risk Governance, ERM, and Capital Planning


ERP EXAM PART II

PART II EXAM WEIGHT | 15%

TOPICS AND READINGS

The broad areas of knowledge covered in readings related to Risk Governance, ERM, and Capital Planning
include the following:

• Economic capital frameworks and capital allocation


• Risk-adjusted return on capital (RAROC)
• ERM frameworks and risk governanceDelta-gamma hedging
• Risk assessment and management tools
• Risk appetite and risk tolerance
• Strategic risk management
• Management and governance of emerging risks
• Case studies in ERM implementation
• Control and validation
• Cybersecurity
• Financial statement analysis
• Decision analysis and decision quality
• GARP Code of Conduct

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

READINGS FOR RISK GOVERNANCE, ERM, AND CAPITAL PLANNING | 9 QUESTIONS


ERP EXAM PART II

1. James Lam, Implementing Enterprise Risk Management – From Methods to Applications. (Hoboken, NJ:
John Wiley & Sons, 2017).
• Chapter 7. The ERM Framework
• Chapter 12. Risk Appetite Statement
• Chapter 13. Risk Control Self-Assessments
• Chapter 15. Strategic Risk Management
• Chapter 17. Integration of KPIs and KRIs

2. Glen Swindle, Valuation and Risk Management in Energy Markets. (Cambridge, UK: Cambridge University
Press, 2014).
• Chapter 16. Control, Risk Metrics and Credit

3. Michel Crouhy, Dan Galai, and Robert Mark, The Essentials of Risk Management, 2nd Edition. (New York,
NY: McGraw-Hill, 2014).
• Chapter 17. Risk Capital Attribution and Risk-Adjusted Performance Measurement

4. World Energy Council, World Energy Perspectives: The Road to Resilience 2016 - Managing Cyber Risks.
(World Energy Council, 2016).*

5. John Fraser, Betty Simkins, and Kristina Narvaez, Implementing Enterprise Risk Management: Case
Studies and Best Practices. (Hoboken, NJ: John Wiley & Sons, 2015).
• Chapter 4. Value and Risk: Enterprise Risk Management at Statoil
• Chapter 20. Implementing Risk Management within Middle Eastern Oil and Gas Companies

6. Betty Simkins, and Russell Simkins, eds, Energy Finance and Economics. (Hoboken, NJ: John Wiley &
Sons, 2013).
• Chapter 9. Financial Statement Analysis for Oil and Gas Companies

7. International Risk Governance Council (IRGC), IRGC Guidelines for Emerging Risk Governance. (2015).*

8. SPE International, SPE Technical Report: Guidance for Decision Quality for Multicompany Upstream
Projects. (2016).*

9. Global Association of Risk Professionals (GARP), Code of Conduct.*

*This reading is freely available on the GARP website.

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

2019 Energy Oversight Committee


Richard Apostolik...............................................................................................Global Association of Risk Professionals

Ben Baglin, ERP.................................................................................................EDF Trading

Stuart Chaplin.....................................................................................................Shell Trading and Supply

Gordon E. Goodman........................................................................................Retired (Occidental Petroleum, NRG Energy)

Dr. Vince Kaminski............................................................................................Rice University

Glenn Labhart, EOC Chair..............................................................................Labhart Risk Advisors

Alessandro Mauro.............................................................................................MKS (Switzerland) SA

Peter O’Neill......................................................................................................Archer Daniels Midland

Dr. John Parsons................................................................................................Massachusetts Institute of Technology

Laurent Pommier, ERP....................................................................................PSE&G

Michael Sell.......................................................................................................Global Association of Risk Professionals

Jonathan C. Stein..............................................................................................Hess Corporation

Dr. Chris Strickland...........................................................................................Lacima Group

Dr. Glen Swindle.................................................................................................Scoville Risk Partners

Gary Taylor........................................................................................................British Petroleum

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2019 Energy Risk Professional (ERP®) Study Guide Exam Part II

Creating a culture of risk awareness ®

garp.org
About GARP | The Global Association of Risk Professionals (GARP) is a non-partisan,
not-for-profit membership organization serving the risk management industry.
Founded in 1996, GARP advances the profession through education, research and
promotion of best practices through the GARP Risk Institute, GARP Benchmarking
Initiative and an array of informational and certification programs. GARP has
200,000 members in more than 190 countries and territories, and has certified more
than 50,000 professionals.

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