2012 ERP® Exam

Preparation Handbook
The designation for risk professionals
in the energy sector
 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook
A Framework for Tackling the ERP Exam
The ERP Exam Preparation Handbook is
a study aid for candidates to reference
as they prepare to take the Energy Risk
Professional (ERP®) Exam. The Handbook
highlights key concepts, fundamental
knowledge and quantitative relationships
found in the readings outlined in the ERP
Study Guide and is intended to augment,
not to replace, the ERP Examination AIM
Statements or Study Guide respectively; it
is strongly recommended that candidates
incorporate these documents in their
exam preparation.
About the ERP Examination
The ERP Examination consists of 160
questions drawn exclusively from the core
readings outlined in the ERP Study Guide.
The content covered in the coure readings
spans both the physical commodity and
financial energy markets and has been
compiled in consultation with GARP’s
Energy Oversight Committee (EOC). While
many of the readings are written from a risk
management point-of-view, some others
are not. In fact, a number of readings for
topics within the physical commodity
section may be somewhat technical or
scientific in nature. In these cases, candi-
dates should focus not on the technical
details of the reading but rather on the
overall content of the material from the
perspective of a risk manager with an eye
towards applying the information towards
situations they may encounter during their
energy risk career. For example, candidates
will not be asked specific engineering
questions (such as calculating pipeline
wall strength) or highly in-depth geologic
questions on the ERP Exam. If candidates
Exam preparation will vary from individual to individual and will be based on a number of factors including an individual’s professional experience,
their general level of knowledge of the energy markets and reading comprehension aptitude.
© 2012 Global Association of Risk Professionals. All rights reserved.
are unsure of the purpose of a reading,
they should always consult the relevant
AIM Statements for guidance. Moreover, it
is possible that outside material the candi-
date has read may provide information or
definitions that conflict with a core ERP
reading. In the case of such a conflict, the
candidate should always rely on the core
readings referenced in the ERP Study Guide
as questions on the ERP Exam will be drawn
exclusively from this material.
Preparation for the Exam
The Energy Risk Professional certification
Exam is a self-directed study program.
One often asked question is: “how long will
it take me to prepare for the ERP Exam?”
Unfortunately, this question has no simple
answer. Exam preparation will vary from
individual to individual and will be based
on a number of factors including an individ-
ual’s professional experience, their general
level of knowledge of the energy markets
and reading comprehension aptitude.
For past exams, a majority of candidates
report spending between 150 to 300 hours
preparing for the exam. To accommodate
those demands, this handbook offers two
reading plans to distribute the reading
material over 15- or 20-week intervals.
However, these plans are only meant to
be a guideline; you may feel the need for
more or less preparation time.
In general, GARP recommends that candi-
dates prepare for the exam at a gradual but
steady pace; attempting to “cram” study
time into the weeks immediately before
the exam is not likely to be a successful
preparation method.
1
2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

AIM Statements, The AIM Statements have been developed as a general guide for exam question development
Practice Exams and should be referenced in conjunction with the core readings contained in the ERP Study
and Quizzes Guide. Reviewing the material in the Study Guide with the AIM statements in mind will help
candidates to better prepare for the exam by focusing their attention on the topics considered
most relevant and applicable to a risk management practitioner in the energy industry.

To further assist candidates in their preparation for the ERP Examination, GARP has created
ERP Practice Exams and Practice Quizzes that are available on our website. The Practice
Exams are designed to simulate both the style and range of questions found on the ERP
Examination, thus helping ERP Candidates to gauge the expected time necessary to answer
individual questions and to devise an exam day strategy. Each of the four Practice Quizzes
provide a series of ten review questions which focus on specific sections of the ERP
Examination: Hydrocarbons, Electricity/Renewables, Financial Products, and Modeling/Risk
Management techniques. The Practice Quizzes are designed to provide candidates with a tool
to review and test their comprehension of key concepts as they work through the study plans
outlined herein. It is strongly suggested that Practice Quizzes be taken after a candidate
completes their review of the core readings that precede each quiz (please see the 15- and
20-week reading plans for more information). Practice Exams and Practice Quizzes include
explanations of the correct answer for each question so that candidates can better under-
stand their incorrect replies and identify areas of weakness that need reinforcement. The ERP
Practice Exams and Practice Quizzes are available for free download on the GARP website at
http://www.garp.org/erp/study-center/free-practice-exams.aspx.

Study Groups GARP strongly encourages candidates to form study groups, whenever possible, so that they
may prepare for the examination with others. Study groups are a great way for candidates to
share the study load while helping each other with topics where they may individually have a
weakness; it is also a good way to meet fellow ERP candidates. We encourage candidates to
use both the official ERP Facebook and LinkedIn pages to find or form local study groups for
the ERP Exam.

Finally, there are a number of third-party course providers who offer ERP Exam preparation
courses for candidates who feel they may benefit from a more structured test-preparation
program. A list of GARP-approved third-party course providers can be found at
http://www.garp.org/erp/study-center/exam-preparation-providers.aspx.

Exam Language The dialect used in the examination is American English. GARP is aware that not every ERP
candidate has American English as his or her native language. In the exam development
process, GARP strives to ensure that questions are written in a clear, concise form and avoid
the use of colloquialisms or other terms or phrases that may be unfamiliar to a non-native
American English speaker.

2 © 2012 Global Association of Risk Professionals. All rights reserved.

 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Calculator Policy
Only the following types of business calculators are authorized for use on the examination,
there will be no exceptions to this policy. Use of a non-authorized calculator during the exam
will result in the candidate’s answer sheet not being graded, and the candidate receiving no
score for the exam. Candidates may not consult the operator’s manual for their calculator
during the exam. Calculator memory must be cleared prior to the start of the exam. The only
calculators approved for use during the ERP Examination are:

• Texas Instruments BA II Plus (both versions) including the BA II Plus Professional

• Hewlett Packard 10B II, 10B II+, 20B, 12C (including the HP 12C Platinum and the
Anniversary Edition)

To help ensure a positive exam experience, candidates should review all information about
exam day procedures at http://www.garp.org/erp/exam-overview/exam-day-information.aspx.
No exceptions to these procedures will be made on exam day.

Key Concepts, The key concepts listed below are intended to help candidates identify the major themes
Quantitative from each section of the Study Guide. These represent the core concepts that ERP candidates
Relationships, should be well versed in as they prepare for a career in the field of energy risk management.
Common Candidates should note that in many cases a key concept will relate directly or indirectly to
Abbreviations several AIM statements throughout the core readings.
and Contract
Specifications Hydrocarbon Resources

• The legal aspects of how mineral rights to a reserve are acquired; how reserves are put
into production
• Crude oil grades, specifications and relative value against benchmark crudes
• How crude oil prices are set by the global market
• The basics of the refining process—what products are created from crude oil, refinery
complexity and how complexity affects operating costs and production decisions
• Unconventional hydrocarbon resources and their growing importance for global markets
• Basics of the natural gas industry including volumetric and heat measures, and what
constitutes natural gas
• Liquefied Natural Gas (LNG)—how is it produced, how contracts for trade are structured
and the role of LNG in the global energy market today
• Techniques like the Fischler-Tropsch and Gas-to-Liquids processes and the commodities
they produce
• The impact of shale gas on global gas pricing and market economics
• Grades of coal, including their heat content rankings

© 2012 Global Association of Risk Professionals. All rights reserved. 3

2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Key Concepts, Electricity Generation, Distribution and Trading

Quantitative
Relationships, • Electricity market fundamentals including the factors that influence how rates are set
Common • Source fuels for electricity production (including Nuclear and Hydro), knowledge of the
Abbreviations benefits and drawbacks of each
and Contract • Heat rate and spark spread calculations—how they are performed and how they impact
Specifications market decisions
• The fundamentals of electricity transmission and the unique financial products used to
market electricity
• The differences between a regulated and deregulated electricity market; the key
operational features of the deregulated market

Renewables, Trends in the Carbon Market and Emissions Trading

• Fundamental economic drivers of renewable energy projects

• The sources of energy that are considered “renewable,” the benefits and drawbacks of each
• How market-based carbon credit/carbon offset transactions work
• Project finance calculations and investment decisions associated with renewable projects
• Current regulatory trends in global carbon markets and clean-air regulation

Financial Products, Trading, Hedging and Valuation

• Understand the difference between forward and future contracts, how and why each is used
• Relate the impact of storage cost, convenience yield and lease rate on forward pricing
• Evaluate the various types of financial instruments used in energy transactions, including
the different kinds of swaps, options and structured transactions and their practical application
• Appreciate the unique characteristics of energy and natural gas commodities and under-
stand how these traits affect the market for electricity and natural gas commodity trading
and valuation
• Be able to create and evaluate a basic arbitrage transaction using energy commodities and
evaluate the risk/reward associated with fundamental trading positions
• Develop a working knowledge of the “greeks” and understand how they relate to option
valuation and risk management
• Construct a basic hedge position and understand what it means to dynamically hedge
a position
• Be able to construct and evaluate a hedge for physical and/or financial assets
• Understand real option valuation and how it is used for investment decisions
• Use a binomial lattice to value a real option

4 © 2012 Global Association of Risk Professionals. All rights reserved.

 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Key Concepts, Modeling Techniques for Energy Commodities

Quantitative
Relationships, • Understand the purpose of modeling; know the basic model types and parameters,
Common including their limitations
Abbreviations • Know the terms backwardation and contango and how they affect forward price curves
and Contract • Understand the key concepts related to volatility including the differences between
Specifications historical volatility, market implied volatility, model implied volatility, volatility skews and
smiles and annualized volatility
• Know the special challenges associated with modeling electricity

Risk Management Fundamentals

• Identify the various types of risk: what are they, in what situations are they found and how
are they managed
• Understand Value-at-Risk (VaR), how it is calculated, and how it is used
• Know the types of stress tests typically used by financial organizations and the general
benefits of stress testing
• Understand the difference between counterparty risk and credit/lending risk
• Know the role of a central clearinghouse in financial transactions
• Understand the relationship between Expected Exposure and Potential Future Exposure
• Be familiar with the fundamentals of Enterprise Risk Management (ERM)

Current Events

The Current Events section is designed to capture several developing industry trends that
may impact the decision-making process of an energy risk professional, yet are too recent to
be addressed in published text books on energy risk management. Candidates should study
and understand the basic concepts associated with each reading as summarized within the
AIM statements related to each.

Fundamental The ERP Exam is not meant to be a rigorous quantitative exercise that requires memorization
Theories and of highly complex formulas. ERP candidates are, however, expected to have an understanding
Quantitative of fundamental quantitative concepts and relationships covered in the core readings. Candi-
Relationships dates should be prepared to solve a number of mathematical calculations based solely on their
understanding of these fundamental concepts. While we do not provide a list of formulas for
the exam, in some cases, particularly for more complex or obscure calculations, information
about terms or values within an equation may be provided to the candidate in the question.

© 2012 Global Association of Risk Professionals. All rights reserved. 5

2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Fundamental Fundamental data analysis concepts include but are not limited to:
Theories and
Quantitative • Time series analysis and normal vs. lognormal distribution analyses
Relationships • Mean, standard deviation, skew, kurtosis
• Statistical testing for data integrity and measures of fit
• Mean reversion

Fundamental pricing and valuation theories include but are not limited to:

• Spot price estimation

• Forward price estimation
• Futures price estimation using energy commodity spot price data
• Option valuation
• Real option valuation

Fundamental quantitative relationships include but are not limited to:

• Barrel of Oil Equivalency (BOE)

• Gas/oil ratio
• Energy commodity calculations: heat rate, crack spread, spark spread
• Zero coupon bond payoff—Synthetic commodity
• Energy commodity future and forward contract valuation
• Energy commodity arbitrage profit/loss
• Payoff profile for American, European and various exotic options
• Cashflows associated with various types of swap transactions
• Put/call parity
• Profit/loss position for straddle, collars and other hedging structures
• Net profit calculation for a power plant
• Volatility estimation using historical data and market implied prices
• Average long-term volatility from discrete volatilities
• Fixed-for-floating swap settlement calculations
• Value-at-Risk (VaR) of an asset or portfolio for a given confidence level
• Calculate credit risk exposures including: settlement risk, replacement risk,
expected exposure and potential future exposure
• Heating and cooling degree days (HDD/CDD)

Common The following is a list of abbreviations commonly used in the energy risk management profes-
Abbreviations sion; many of these abbreviations will likely appear on the ERP Examination. Candidates are
advised to be familiar with all of the abbreviations on this list before sitting for the exam.

6 © 2012 Global Association of Risk Professionals. All rights reserved.

 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Common ATM At-the-money

Abbreviations Bbl Barrel of _________
BCF Billion Cubic Feet (gas measurement)
Btu British Thermal Unit
CAD Canadian Dollar
CEO Chief Executive Officer
CFO Chief Financial Officer
CFTC Commodity Futures Trading Commission
CIF Cargo, Insurance, Freight
CME Chicago Mercantile Exchange
CNG Compressed Natural Gas
CO2 Carbon dioxide
CRO Chief Risk Officer
ERCOT Electric Reliability Council of Texas
ERM Enterprise Risk Management
EUR Euro (currency)
FASB Financial Accounting Standards Board
GBM Geometric Brownian Motion
GO Gasoil
GTL Gas-to-liquids
ICE Intercontinental Exchange (London)
ISO Independent System Operator
ITM In-the-money
kW Kilowatt
kWh Kilowatt hour
LNG Liquefied Natural Gas
LPG Liquid Petroleum Gas
LSFO Low-Sulfur Fuel Oil
MISO Midwest Independent System Transmission Operator (electricity market)
MMBtu One million British Thermal Units
MT Metric ton
MTM Mark-to-market
MW Megawatt
MWh Megawatt hour
NGL Natural Gas Liquids
NWE Northwest Europe (Rotterdam, physical delivery point for gas/oil contracts)
NYMEX New York Mercantile Exchange
OTC Over-the-counter
OTM Out-of-the-money
PJM Pennsylvania/New Jersey/Maryland Interconnection (electricity market)
RBOB Reformulated Blendstock for Oxygenate Blending (standard NYMEX gasoline contract)
RTO Regional Transmission Organization
Therm A measure equal to 100,000 BTUs
USD United States Dollar
VaR Value-at-Risk
WTI West Texas Intermediate (crude oil )

© 2012 Global Association of Risk Professionals. All rights reserved. 7

2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Standard Energy Exchange traded energy commodity futures and options contracts are typically traded in
Contract standardized lot sizes. Listed below are the volumetric sizes of key energy commodity futures
Specifications and options contracts traded on exchanges like the CME, ICE and NYMEX. Candidates are
advised to be familiar with the characteristics of standard exchange-traded contracts before
sitting for the exam.

Crude Oil: each contract is for 1,000 barrels (equal to 42,000 gallons)
Heating Oil: each contract is for 42,000 gallons
Gasoline (and other distillates): 42,000 gallons
ICE Gasoil Futures: 100 Metric Tons
Natural Gas (Henry Hub Futures): 10,000 MMBtu
Natural Gas Swap (Henry Hub, Chicago, others): 2,500 MMBtu
Electricity (CME PJM futures contracts): 5 MWh
Electricity (ICE UK Base futures contracts): 5 MWh minimum
Electricity (CME options contracts): 40 MWh
Electricity (NYMEX futures contracts): 40 MWh

15- and 20-Week Outlined on the following pages are two suggested plans, covering 15 and 20 weeks, respec-
Study Plans tively, for tackling the material outlined in the ERP Study Guide. Weekly readings include
selections from Current Issues in Energy, paired whenever possible with relevant topics from
other portions of the Study Guide. The primary goal of the plans is to break the core readings
down into logical pieces that can be disseminated by candidates more efficiently. Every candi-
date has a unique level of experience and reading aptitude; it is impossible to accurately judge
the amount of time necessary for each individual candidate to prepare for the exam. Both
the 15- and 20-week study plans are offered simply as a guideline or tool for approaching the
material. Candidates should always feel free to adjust the schedule based on their experience,
study time available and possible desire to add variety by intertwining physical and
financial readings.

8 © 2012 Global Association of Risk Professionals. All rights reserved.

ERP Exam
15-Week
Study Plan
2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Hydrocarbon Resources 1 Institut Français du Petrolé Publications. Oil, Gas Exploration, and Production: Reserves,
Costs, Contracts (Paris: Editions Technip, 2007). Chapter 3.

Charlotte Wright and Rebecca Gallun. Fundamentals of Oil & Gas Accounting,
5th Edition (Tulsa, OK: PennWell, 2008). Chapters 1 and 15.

Norman J. Hyne. Nontechnical Guide to Petroleum Geology, Exploration, Drilling, and

Production, 2nd Edition (Tulsa, OK: PennWell Books, 2001). Chapter 1.

Purvin & Gertz, Inc. The Role of WTI as a Crude Oil Benchmark. Section Three.

William L. Leffler. Petroleum Refining in Nontechnical Language, 3rd Edition

(Tulsa, OK: PennWell, 2000). Chapter 20.

Bunkerworld. D2 and No.2 Diesel Fuel: An Introduction.

2 Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
Chapter 2.1.

Vivek Chandra. Fundamentals of Natural Gas: An International Perspective

(Tulsa, OK: PennWell Books, 2006). Chapters 1, 2, 3, and 4.

Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley &
Sons, 2008). Chapter 36.

Thomas O. Miesner and William L. Leffler. Oil and Gas Pipelines in Nontechnical
Language (Tulsa, OK: PennWell Books, 2006). Chapters 10 and 12.

3 Michael Toman, Aimee E. Curtright, David S. Ortiz, Joel Darmstadter, Brian Shannon.
Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs.
(Santa Monica, CA: Rand, 2008). Chapter 4.

Department of Energy Publication: Liquefied Natural Gas: Understanding the Basic Facts.

PriceWaterhouseCoopers: Today’s LNG Market Dynamics.

Kenneth Medlock. Impact of Shale Gas Development on Global Gas Markets

(Wiley Periodicals, Inc., 2011).

International Monetary Fund. “Oil Scarcity, Growth and Global Imbalances.”

4 James Speight. Handbook of Coal Analysis (Wiley-Interscience, 2005). Chapters 1 and 2.

James T. Bartis, Frank A. Camm and David S. Ortiz. Producing Liquid Fuels from Coal:
Prospects and Policy Issues (Santa Monica, CA: Rand, 2008). Chapters 3 and 6.

Richard Morse and Gang He. “The World's Greatest Coal Arbitrage: China's Coal Import
Behavior and Implications for the Global Coal Market.”

Take ERP Practice Quiz #1

10 © 2012 Global Association of Risk Professionals. All rights reserved.

 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Electricity 5 Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
Chapters 2.2 and 4.1.

Chris Harris. Electricity Markets: Pricing, Structures and Economics (West Sussex,
England: John Wiley & Sons, 2006). Chapter 7.

Sally Hunt. Making Competition Work in Electricity (New York: John Wiley & Sons, Inc.,
2002). Chapters 2, 7 and 8.

6 Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
Chapters 4.3 and 4.4.

Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional
and Alternative Sources (Armonk, NY: M.E. Sharpe, Inc., 2007). Chapter 8.

David Schlissel and Bruce Biewald. Nuclear Power Plant Construction Costs
(Synapse Energy Economics, Inc.).

Peter Coy. The Prospect for Safe Nuclear (Bloomberg Businessweek, March 24, 2011).

Ann Chambers. Renewable Energy in Nontechnical Language (Tulsa, OK: PennWell

Books, 2006). Chapter 6.

Renewable Energy 7 Geoffrey Heal. The Economics of Renewable Energy.

Chris Grobey, John Pierce, Michael Faber and Greg Broome. Project Finance Primer for
Renewable Energy and Clean Tech Projects.

State and Trends of the Carbon Market (The World Bank, 2011). Sections 2 though 4.

Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional
and Alternative Sources (Armonk, NY: M.E. Sharpe, Inc., 2007). Chapter 9.

Govinda Timilsina and Ashish Shrestha. Biofuels: Markets, Targets and Impacts
(The World Bank, July 2010). Sections 1 through 5.

Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley &
Sons, 2008). Chapter 37.

Bloomberg New Energy Finance. Global Trends in Renewable Energy Investment.

Take ERP Practice Quiz #2

Financial Products 8 Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options,
2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 3.

Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004).
Chapters 1, 2 and 3.

Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. “CFTC Adopts Final Position
Limit Rules at October 18 Open Meeting.”

Ivan Diaz-Rainey, Mathias Siems and John Ashton. “The Financial Regulation of
European Wholesale Energy and Environmental Markets.”

© 2012 Global Association of Risk Professionals. All rights reserved. 11

2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Financial Products 9 Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapter 9.

Robert McDonald, Derivatives Markets, 2nd Edition (Boston: Addison-Wesley, 2006).

Chapter 6.

Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options,
2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 4.

Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy

Derivatives (London: Risk Books, 2005). Chapter 4.

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapters 9 and 10.

10 Alexander Triantis. Handbook of Modern Finance (New York: Research Institute of

America, 2003). Chapter 7.

William Bailey, Benoit Couet, Ashish Bhandari, Soussan Faiz, Sunaram Srinivasan and
Helen Weeds. Unlocking the Value of Real Options (Oilfield Review Winter 2003/2004).

Peter C. Beutel. Surviving Energy Prices (Tulsa, OK: PennWell Books, 2005). Chapter 3.

Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John
Wiley & Sons, 2008). Chapter 13.

Geoffrey Considine, Ph.D. Introduction to Weather Derivatives.

Kevin Baumert and Mindy Selman. Data Note: Heating and Cooling Degree Days
(World Resources Institute, 2003).

Take ERP Practice Quiz #3

Modeling Energy Prices 11 Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapters 2, 5 and 8.

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapter 2.

Helyette Geman (ed). Risk Management in Commodity Markets: From Shipping to

Agriculturals and Energy. Chapter 2.

12 Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapter 4.

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapters 3, 4 and 8.

12 © 2012 Global Association of Risk Professionals. All rights reserved.

 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Risk Management 13 Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
Fundamentals (London: Lacima Publications, 2000). Chapter 10.

Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk:
An Integrated View on Power and Other Energy Markets (West Sussex, England:
John Wiley & Sons, 2007). Chapters 6.2 and 6.3.

Alessandro Mauro. “Price Risk Management in the Energy Industry: The Value at Risk
Approach,” Proceedings of the XXII Annual International Conference of the International
Association for Energy Economics (June 9-12, 1999).

Jose Ramon Aragones, Carlos Blanco, and Kevin Dowd. Incorporating Stress Tests Into
Market Risk Modeling.

Craig Pirrong. The Economics of Central Counterparty Clearing: Theory and Practice.
(ISDA Working Paper).

14 Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John
Wiley & Sons, 2008). Chapters 10, 15 and 16.

Jon Gregory. Counterparty Credit Risk (West Sussex, England: John Wiley & Sons,
2010). Chapters 2 and 3.

Casualty Actuarial Society, Enterprise Risk Management Committee. Overview of

Enterprise Risk Management.

Ludwig Chincarini. A Case Study on Risk Management: Lessons from the Collapse of
Amaranth Advisors L.L.C.

Connecticut Law Review. Risk Management and Corporate Governance: The Case
of Enron.

NERA Economic Consulting. “Lessons from the BP Deepwater Horizon Oil Spill”
(September 2010).

Mark A. Cohen, Madeline Gottlieb, Joshua Linn, and Nathan Richardson. “Deepwater
Drilling: Law, Policy and Economics of Firm Organization and Safety.”

Take ERP Practice Quiz #4

Review 15 Take ERP Practice Examination(s)

http://www.garp.org/erp/study-center/free-practice-exams.aspx

Review any areas of the ERP Study Guide where additional preparation is necessary.

© 2012 Global Association of Risk Professionals. All rights reserved. 13

ERP Exam
20-Week
Study Plan
 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Hydrocarbons Resources 1 Institut Français du Petrolé Publications. Oil, Gas Exploration, and Production: Reserves,
Costs, Contracts (Paris: Editions Technip, 2007). Chapter 3.

Charlotte Wright and Rebecca Gallun. Fundamentals of Oil & Gas Accounting,
5th Edition (Tulsa, OK: PennWell, 2008). Chapters 1 and 15.

Norman J. Hyne. Nontechnical Guide to Petroleum Geology, Exploration, Drilling, and

Production, 2nd Edition (Tulsa, OK: PennWell Books, 2001). Chapter 1.

Thomas O. Miesner and William L. Leffler. Oil and Gas Pipelines in Nontechnical
Language (Tulsa, OK: PennWell Books, 2006). Chapters 10 and 12.

2 Purvin & Gertz, Inc. The Role of WTI as a Crude Oil Benchmark. Section Three.

William L. Leffler. Petroleum Refining in Nontechnical Language, 3rd Edition

(Tulsa, OK: PennWell, 2000). Chapter 20.

Bunkerworld. D2 and No.2 Diesel Fuel: An Introduction.

James Speight. Handbook of Coal Analysis (Wiley-Interscience, 2005). Chapters 1 and 2.

James T. Bartis, Frank A. Camm and David S. Ortiz. Producing Liquid Fuels from Coal:
Prospects and Policy Issues (Santa Monica, CA: Rand, 2008). Chapters 3 and 6.

Richard Morse and Gang He. “The World's Greatest Coal Arbitrage: China's Coal Import
Behavior and Implications for the Global Coal Market.”

3 Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
Chapter 2.1.

Vivek Chandra. Fundamentals of Natural Gas: An International Perspective

(Tulsa, OK: PennWell Books, 2006). Chapters 1, 2, 3, and 4.

Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley &
Sons, 2008). Chapter 36.

4 Michael Toman, Aimee E. Curtright, David S. Ortiz, Joel Darmstadter, Brian Shannon.
Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs.
(Santa Monica, CA: Rand, 2008). Chapter 4.

Department of Energy Publication: Liquefied Natural Gas: Understanding the Basic Facts.

PriceWaterhouseCoopers: Today’s LNG Market Dynamics.

Kenneth Medlock. Impact of Shale Gas Development on Global Gas Markets

(Wiley Periodicals, Inc., 2011).

International Monetary Fund. “Oil Scarcity, Growth and Global Imbalances.”

Take ERP Practice Quiz #1

© 2012 Global Association of Risk Professionals. All rights reserved. 15

2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Electricity 5 Sally Hunt. Making Competition Work in Electricity (New York: John Wiley & Sons, Inc.,
2002). Chapters 2, 7 and 8.

Chris Harris. Electricity Markets: Pricing, Structures and Economics (West Sussex,
England: John Wiley & Sons, 2006). Chapter 7.

6 Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
Chapters 2.2, 4.1, 4.3 and 4.4.

Ann Chambers. Renewable Energy in Nontechnical Language (Tulsa, OK: PennWell

Books, 2006). Chapter 6.

7 Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional
and Alternative Sources (Armonk, NY: M.E. Sharpe, Inc., 2007). Chapter 8.

David Schlissel and Bruce Biewald. Nuclear Power Plant Construction Costs
(Synapse Energy Economics, Inc.).

Peter Coy. The Prospect for Safe Nuclear (Bloomberg Businessweek, March 24, 2011).

Renewable Energy 8 Geoffrey Heal. The Economics of Renewable Energy.

Chris Grobey, John Pierce, Michael Faber and Greg Broome. Project Finance Primer for
Renewable Energy and Clean Tech Projects.

State and Trends of the Carbon Market (The World Bank, 2011). Sections 2 though 4.

9 Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional
and Alternative Sources (Armonk, NY: M.E. Sharpe, Inc., 2007). Chapter 9.

Govinda Timilsina and Ashish Shrestha. Biofuels: Markets, Targets and Impacts
(The World Bank, July 2010). Sections 1 through 5.

Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley &
Sons, 2008). Chapter 37

Bloomberg New Energy Finance. Global Trends in Renewable Energy Investment.

Take ERP Practice Quiz #2

Financial Products 10 Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options,
2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 3.

Ivan Diaz-Rainey, Mathias Siems and John Ashton. “The Financial Regulation of
European Wholesale Energy and Environmental Markets.”

Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004).
Chapters 1 and 2.

Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. “CFTC Adopts Final Position
Limit Rules at October 18 Open Meeting.”

16 © 2012 Global Association of Risk Professionals. All rights reserved.

 2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Financial Products 11 Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004).
Chapter 3.

Robert McDonald, Derivatives Markets, 2nd Edition (Boston: Addison-Wesley, 2006).

Chapter 6.

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapter 9.

Geoffrey Considine, Ph.D. Introduction to Weather Derivatives.

Kevin Baumert and Mindy Selman. Data Note: Heating and Cooling Degree Days.
(World Resources Institute, 2003).

12 Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapters 9 and 10.

Alexander Triantis. Handbook of Modern Finance (New York: Research Institute of

America, 2003). Chapter 7.

William Bailey, Benoit Couet, Ashish Bhandari, Soussan Faiz, Sunaram Srinivasan and
Helen Weeds. Unlocking the Value of Real Options (Oilfield Review Winter 2003/2004).

13 Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options,
2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 4.

Peter C. Beutel. Surviving Energy Prices (Tulsa, OK: PennWell Books, 2005). Chapter 3.

Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John
Wiley & Sons, 2008). Chapter 13.

Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy

Derivatives (London: Risk Books, 2005). Chapter 4.

Take ERP Practice Quiz #3

Modeling Energy Prices 14 Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapters 2 and 5.

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapter 2.

15 Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapter 4.

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapters 4 and 8.

16 Helyette Geman (ed). Risk Management in Commodity Markets: From Shipping to

Agriculturals and Energy. Chapter 2.

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
(London: Lacima Publications, 2000). Chapter 3.

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition
(New York: McGraw Hill, 2007). Chapter 8.

© 2012 Global Association of Risk Professionals. All rights reserved. 17

2012 Energy Risk Professional (ERP®) Examination Preparation Handbook

Description Session Reading

Risk Management 17 Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management
Fundamentals (London: Lacima Publications, 2000). Chapter 10.

Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk:
An Integrated View on Power and Other Energy Markets (West Sussex, England:
John Wiley & Sons, 2007). Chapter 6.2.

Alessandro Mauro. “Price Risk Management in the Energy Industry: The Value at Risk
Approach,” Proceedings of the XXII Annual International Conference of the International
Association for Energy Economics (June 9-12, 1999).

Jose Ramon Aragones, Carlos Blanco, and Kevin Dowd. Incorporating Stress Tests Into
Market Risk Modeling.

18 Tom James. Energy Markets: Price Risk Management and Trading (Singapore:
John Wiley & Sons, 2008). Chapter 10, 15 and 16.

Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk:
An Integrated View on Power and Other Energy Markets (West Sussex, England:
John Wiley & Sons, 2007). Chapter 6.3.

Casualty Actuarial Society, Enterprise Risk Management Committee. Overview of

Enterprise Risk Management.

NERA Economic Consulting. “Lessons from the BP Deepwater Horizon Oil Spill”
(September 2010).

19 Jon Gregory. Counterparty Credit Risk (West Sussex, England: John Wiley & Sons,
2010). Chapters 2 and 3.

Craig Pirrong. The Economics of Central Counterparty Clearing: Theory and Practice.
(ISDA Working Paper).

Mark A. Cohen, Madeline Gottlieb, Joshua Linn, and Nathan Richardson. “Deepwater
Drilling: Law, Policy and Economics of Firm Organization and Safety.”

Ludwig Chincarini. A Case Study on Risk Management: Lessons from the Collapse of
Amaranth Advisors L.L.C.

Connecticut Law Review. Risk Management and Corporate Governance: The Case
of Enron.

Take ERP Practice Quiz #4

Review 20 Take ERP Practice Examination(s)

http://www.garp.org/erp/study-center/free-practice-exams.aspx

Review any areas of the ERP Study Guide where additional preparation is necessary.

ERP Examination—May 19, 2012 and November 17, 2012

18 © 2012 Global Association of Risk Professionals. All rights reserved.

2012 Energy Oversight Committee (EOC) Members

Ken Abbott ..................................Managing Director, Morgan Stanley & Company

Richard Apostolik .....................President and CEO, Global Association of Risk Professionals

Mark Galicia .................................Commercial Manager, BP North America, Inc.

Gordon E. Goodman ................Trading Control Officer, Occidental Petroleum Corporation

James Brown...............................Managing Director, Morgan Stanley & Company

Mark Jenner.................................Director, Credit Risk, BG Group

Jeff Jewell ....................................Chief Risk Officer, DTE Energy

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

Spyros Maragos............................VP, Refined Products Analytics, Louis Dreyfus Energy Services, LP

Alessandro Mauro .....................Director of Risk Management, Litasco SA

Mark D. May ......................................Manager, Regional Risk Supply & Trading, Americas, ConocoPhillips

Jeff Parke .....................................Senior Director, Risk Management, Koch Industries, Inc.

Jonathan C. Stein ......................Chief Risk Officer, Vice President, Hess Corporation

Andrew D. Sunderman ............Managing Director, JP Morgan

Glen Swindle ...............................Managing Director, Energy Trade & Marketing, Credit Suisse

John Wengler .............................Director of Market Risk Controls, Hess Corporation

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About GARP | The Global Association of Risk Professionals (GARP) is a not-for-profit global membership organization dedicated to
preparing professionals and organizations to make better informed risk decisions. Membership represents over 150,000 risk manage-
ment practitioners and researchers from banks, investment management firms, government agencies, academic institutions, and
corporations from more than 195 countries and territories. GARP administers the Financial Risk Manager (FRM®) and the Energy
Risk Professional (ERP®) Exams; certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk
management via comprehensive professional education and training for professionals of all levels. www.garp.org.

© 2012 Global Association of Risk Professionals. All rights reserved. 1-4-12