ERP

Examination
Study Guide
Changes
2013 to 2014
2014
2014 Energy Risk Professional (ERP) Examination Study Guide
2014 Global Association of Risk Professionals. All rights reserved. 1
OIL, GAS, AND COAL MARKETS
Additions:
1. Betty J. Simkins and Russell E. Simkins, eds. Energy Finance and Economics: Analysis and Valuation, Risk
Management, and the Future of Energy. (Hoboken, New Jersey: Wiley, 2013).
Chapter 11 .................................Real Options and Applications in the Energy Industry
2. William Bailey, Benoit Couet, Ashish Bhandari, Soussan Faiz, Sunaram Srinivasan and Helen Weeds. Unlocking the
Value of Real Options. (Oilfield Review, 2004). Freely available on the GARP Website.
Note: This reading was moved from the Financially Traded Products section.
3. Brent Yacobucci. Analysis of Renewable Identification Numbers (RINs) in the Renewable Fuel Standard.
(Congressional Research Service, July 2013). Freely available on the GARP Website.
4. Vincent Kaminski. Energy Markets. (London: Risk Books, 2012).
Chapter 10................................Natural Gas Transportation and Storage
Chapter 26...............................Coal Markets
5. Richard Morse and Gang He, The World's Greatest Coal Arbitrage: China's Coal Import Behavior and Implications
for the Global Coal Market. (PESD Stanford, August 2010). Freely available on the GARP Website.
Deletions:
6. Joseph Hilyard. The Oil and Gas Industry: A Non-Technical Guide. (Tulsa, OK: PennWell, 2012).
Chapter 1....................................Origins of Oil and Gas
7. Peter A. Nolan and Mark C. Thurber. On the States Choices of Oil Company: Risk Management and the Frontier of the
Petroleum Industry. (PESD Stanford).
8. Davis W. Edwards. Energy Trading and Investing. (New York: McGraw-Hill, 2010).
Chapter 2.1 ...............................Natural Gas
9. PriceWaterhouseCoopers. Todays LNG Market Dynamics. (May 2010).
10. Deutsche Bank. Oil and Gas for Beginners: A Guide to the Oil and Gas Industry. (September 2010).
11. 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 .................................Oil Sands and Synthetic Crude Oil
12. James Speight. Handbook of Coal Analysis. (Wiley-Interscience, 2005).
Chapter 1...................................Coal Analysis
2 2014 Global Association of Risk Professionals. All rights reserved.
2014 Energy Risk Professional (ERP) Examination Study Guide
ELECTRICITY MARKETS AND RENEWABLE GENERATION
For 2014 the Electricity and Renewable Generation have been combined into one section representing 25% of the
ERP Exam.
Additions:
1. Daniel Kirschen and Goran Strbac. Fundamentals of Power System Economics.
(West Sussex, England: John Wiley & Sons, 2004).
Chapter 3..................................Markets for Electrical Energy
Chapter 4 .................................Participating in Markets for Electrical Energy (Sections 4 to 4.3.1.14 only)
Chapter 5..................................System Security and Ancillary Services (Sections 5 to 5.4.3.1 only)
Chapter 7..................................Investing in Generation
2. Steven Stoft. Power System Economics: Designing Markets for Electricity. (Piscataway, NJ: IEEE Press, 2002).
Chapter 2-3..............................Reliability and Generation
Chapter 2-5..............................Value-of-Lost-Load Pricing
Chapter 2-6 .............................Operating-Reserve Pricing
Chapter 3-4.............................Ancillary Services
Chapter 3-1...............................Introduction
Chapter 3-2..............................The Two-Settlement System
Chapter 3-3..............................Day-Ahead Market Designs
Chapter 3-6 .............................The Real-Time Market in Theory
Chapter 5.1 ...............................Power Transmission and Losses
Chapter 5.2 ..............................Physical Transmission Limits
Chapter 5.3..............................Congestion Pricing Fundamentals
Chapter 5.4..............................Congestion Pricing Methods
Chapter 5.9..............................Transmission Rights
3. Vincent Kaminski. Energy Markets.
Chapter 22 ...............................Analytical Tools
Chapter 23...............................Electricity Market Transactions
4. Bo Shen, Girish Ghatikhar, Chun Chun Ni, and Junqiao Dudley. Addressing Energy Demand Through Demand
Response. (Berkeley National Laboratory, June 2012). (Sections 1 to 4 only). Freely available on the GARP Website.
5. Johannes P. Pfeifenberger and Kathleen Spees. Evaluation of Market Fundamentals and Challenges to Long-Term
System Adequacy in Alberta's Electricity Market. The Brattle Group, April 2011. (Sections I, II and III only).
Freely available on the GARP Website.
6. Australian Energy Market Operator. An Introduction to Australias National Electricity Market.
Freely available on the GARP Website.
7. Hogan, Lovells, Lee & Lee. Singapore Energy Market (Schedule 1: Summary of Singapore Electricity Market
Deregulation and Wholesale Market Operations). Freely available on the GARP Website.
2014 Energy Risk Professional (ERP) Examination Study Guide
2014 Global Association of Risk Professionals. All rights reserved. 3
8. P. E. Baker, Prof. C. Mitchell and Dr. B. Woodman. Electricity Market Design for a Low-Carbon Future.
(Sections 1-6 only). Freely available on the GARP Website.
9. Nuclear Energy Agency. Nuclear Energy Today, Second Edition (2012). (Sections 2, 4, 6 and 8 only).
Freely available on the GARP Website.
10. Intergovernmental Panel on Climate Change (IPCC). IPCC Special Report on Renewable Energy Sources and Climate
Change Mitigation.
Chapter 3..................................Direct Solar Energy (Sections 3.3 to 3.5 only)
Chapter 5..................................Hydropower (Sections 5.3 to 5.5 only)
Chapter 7..................................Wind Energy (Sections 7.3 to 7.5 and 7.8 only). Freely available on the GARP Website.
Deletions:
11. Davis W. Edwards. Energy Trading and Investing. (New York: McGraw-Hill, 2010).
Chapter 2.2 ..............................Electricity
Chapter 4.2..............................The Generation Stack
Chapter 4.3..............................Tolling Agreements
12. Chris Harris. Electricity Markets: Pricing, Structures and Economics. (West Sussex, U.K.: John Wiley & Sons, 2006).
Chapter 7..................................Location Models
13. Sally Hunt. Making Competition Work in Electricity. (New York: John Wiley & Sons, Inc., 2002).
Chapter 8..................................Details of the Integrated Trading Model
14. PJM Interconnection. How RTOs Establish Spot Market Prices. (September 2007).
15. Henry Louie and Kai Strunz. Locational Marginal Pricing in North American Power Systems.
16. PJM Interconnection. Financial Transmission Rights. (July 2009).
17. Tom Fogarty and Robert Lamb. Investing in the Renewable Power Market. (Hoboken, NJ: John Wiley & Sons, Inc., 2012).
Chapter 14................................Nuclear
Chapter 15................................Hydropower
Chapter 16................................Geothermal
18. Geoffrey Heal. The Economics of Renewable Energy. (2009).
19. Govinda Timilsina and Ashish Shrestha. Biofuels: Markets, Targets and Impacts. (The World Bank, July 2010).
20. European Wind Energy Association. The Economics of Wind Energy. (March 2009).
21. European Wind Energy Association. Creating the Internal Energy Market in Europe. (September 2012).
22. Joseph E. Aldy and Robert N. Stavins. The Promise and Problems of Carbon Pricing: Theory and Experience.
(Harvard Environmental Economics Program, October 2011).
4 2014 Global Association of Risk Professionals. All rights reserved.
2014 Energy Risk Professional (ERP) Examination Study Guide
FINANCIALLY TRADED ENERGY PRODUCTS AND STRUCTURED TRANSACTIONS
Additions:
1. IEA, The Mechanics of the Derivatives Markets: What They Are and How They Function. (Special Supplement to the
Oil Market Report, April 2011). Freely available on the GARP Website.
2. Vincent Kaminski. Energy Markets.
Chapter 4 .................................Energy Markets: The Instruments
Chapter 6..................................Energy Markets: Exchanges
Chapter 11 .................................U.S. Natural Gas Markets
Chapter 18................................Transactions in the Oil Markets
3. Rajarshi Aroskar. OTC Derivatives: A Comparative Analysis of Regulation in the United States, European Union, and
Singapore. Freely available on the GARP Website.
4. Cleary and Gottlieb. Navigating Key Dodd-Frank Rules Related to the Use of Swaps by End Users. (April 9, 2013).
Freely available on the GARP Website.
5. Gordon Goodman. Swaps: Dodd-Frank Memories. (July 2, 2013). Freely available on the GARP Website.
6. Gordon Goodman. Dodd-Franks Impact on Financial Entities, Financial Activities and Treasury Affiliates.
(October 23, 2013). Freely available on the GARP Website.
Deletions:
7. Helyette Geman. Commodities and Commodity Derivatives, Modeling and Pricing for Agriculture, Metals and Energy.
(New York, NY: John Wiley & Sons, Inc., 2005).
Chapter 1...................................Futures
Chapter 2..................................Forward Curve Modeling in Commodity Markets
8. Robert McDonald. Derivatives Markets, 3rd Edition. (Boston, MA: Addison-Wesley, 2013).
Chapter 5..................................Futures Contracts
Chapter 8..................................Swaps
Chapter 17 ................................Real Options
9. Vincent Kaminski (ed). Managing Energy Price Risk. (London: Risk Books, 2004).
Chapter 1...................................Energy Swaps
Chapter 2..................................Energy Options
Chapter 3..................................Energy Exotic Options
10. Fletcher Sturm. Trading Natural Gas, Cash, Futures, Options and Swaps. (Tulsa, OK: PennWell, 1997).
Chapter 4 .................................Swaps
11. Steven Errera and Stewart L. Brown, Fundamentals of Trading Energy Futures & Options, 2nd Edition.
(Tulsa, OK: PennWell Books, 2002)
Chapter 4 .................................Speculation and Spread Trading
2014 Energy Risk Professional (ERP) Examination Study Guide
2014 Global Association of Risk Professionals. All rights reserved. 5
ENERGY COMMODITY PRICE FORMATION AND MARKET RISK
Additions:
1. James Stock and Mark Watson. Introduction to Econometrics: Brief Edition. (Addison-Wesley, Third Edition, 2010).
Chapter 2.....................................Review of Probability
2. Svetlozar Rachev, Christian Menn and Frank Fabozzi. Fat-Tailed and Skewed Asset Return Distributions: Implications
for Risk Management, Portfolio Selection, and Option Pricing. (Hoboken, NJ: John Wiley & Sons, Inc., 2005).
Chapter 2.....................................Discrete Probability Distributions
3. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management.
(London, Lacima Publications, 2000).
Chapter 9..................................Risk Management of Energy Derivatives
4. Allan Malz. Financial Risk Management: Models, History, and Institutions. (Hoboken, NJ: John Wiley & Sons, 2011).
Chapter 3..................................Value-at-Risk (Sections 3.1 to 3.3 only)
Chapter 4 .................................Nonlinear Risks and the Treatment of Bonds and Options (Section 4.1 only)
5. Kevin Dowd. Measuring Market Risk, Second Edition. (Hoboken, NJ: John Wiley & Sons, Inc., 2005).
Chapter 13................................Stress Testing
Chapter 14................................Estimating Liquidity Risk
Deletions:
6. Michael Miller. Mathematics and Statistics for Financial Risk Management. (Hoboken, NJ: John Wiley & Sons, Inc., 2012).
Chapter 2..................................Probabilities
Chapter 3..................................Basic Statistics (Excluding Applications: Portfolio variance and hedging section only)
7. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition.
(New York, NY: McGraw Hill, 2007).
Chapter 3..................................Modeling Principles and Market Behavior
Chapter 4 .................................Essential Statistical Tools
Chapter 5..................................Spot Price Behavior
Chapter 6...................................The Forward Price Curve
Chapter 8..................................Volatilities
Chapter 10................................Option Valuation
8. 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).
9. Louis Guth and Kristina Sepetys. Value at Risk: Variations on a Theme. (Global Energy Business, May/June 2001).
6 2014 Global Association of Risk Professionals. All rights reserved.
2014 Energy Risk Professional (ERP) Examination Study Guide
10. Jose Ramon Aragones, Carlos Blanco, and Kevin Dowd. Incorporating Stress Tests into Market Risk Modeling.
(Institutional Investor, Inc. Spring 2001).
11. Allan Malz. Financial Risk Management: Models, History, and Institutions. (Hoboken, NJ: John Wiley & Sons, 2011).
Chapter 12 ................................Liquidity and Leverage
12. Frank Fabozzi. The Handbook of Commodity Investing. (Hoboken, NJ: John Wiley & Sons, Inc., 2008).
Chapter 13................................Effective Risk Management Strategies for Commodity Portfolios
2014 Energy Risk Professional (ERP) Examination Study Guide
2014 Global Association of Risk Professionals. All rights reserved. 7
CREDIT, COUNTERPARTY, AND COUNTRY RISK ASSESSMENT
Changes in this section include a transition to Jon Gregorys Counterparty Credit Risk and Credit Value Adjustment: A
Continuing Challenge for Global Financial Markets, 2nd Edition which replaces the previous edition used in the 2013
ERP Curriculum.
Additions:
1. Betty Simkins and Russell Simkins, eds. Energy Finance and Economics: Analysis and Valuation, Risk Management,
and the Future of Energy.
Chapter 9..................................Financial Statement Analysis for Oil and Gas Companies and Competitive Benchmarking
2. Jon Gregory. Counterparty Credit Risk and Credit Value Adjustment: A Continuing Challenge for Global Financial
Markets, 2nd Edition. (West Sussex, UK: John Wiley & Sons, 2012).
Chapter 3..................................Defining Counterparty Credit Risk
Chapter 4 .................................Netting, Compression, Resets and Termination Features
Chapter 5..................................Collateral
Chapter 7..................................Central Counterparties
Chapter 8..................................Credit Exposure (Sections 8.1 to 8.4 only)
Chapter 10................................Default Probability, Credit Spreads and Credit Derivatives (Section 10.1 only)
Chapter 12 ................................Credit Value Adjustment (Section 12.1 only)
Chapter 15................................Wrong-Way Risk (Sections 15.1 to 15.2 and 15.4.4 only)
3. Daniel Wagner. Managing Country Risk. (Boca Raton, FL: CRC Press, 2012).
Chapter 3..................................Assessing Country Risk
Chapter 4 .................................Country Risk Assessment in Practice
Deletions:
4. John Fraser and Betty Simkins. Enterprise Risk Management: Todays Leading Research and Best Practices for
Tomorrows Executives. (Hoboken, NJ: John Wiley & Sons, 2010).
Chapter 15................................Credit Risk Management
5. Craig Pirrong, The Economics of Central Counterparty Clearing: Theory and Practice. (ISDA Working Paper).
8 2014 Global Association of Risk Professionals. All rights reserved.
2014 Energy Risk Professional (ERP) Examination Study Guide
ENTERPRISE RISK MANAGEMENT (ERM) AND BUSINESS ETHICS
Additions:
1. COSO, Understanding and Communicating Risk Appetite. (January 2012).
Freely available on the GARP Website.
2. COSO, Risk Assessment in Practice. (October 2012). Freely available on the GARP Website.
3. COSO, Developing Key Risk indicators to Strengthen Enterprise Risk Management. (December 2010).
Freely available on the GARP Website.
Deletions:
4. Mark A. Cohen, Madeline Gottlieb, Joshua Linn, and Nathan Richardson. Deepwater Drilling: Law, Policy and
Economics of Firm Organization and Safety. (January 2011).
5. NERA Economic Consulting. Lessons from the BP Deepwater Horizon Oil Spill. (September 2010).
6. Senior Supervisors Group. Observations on Developments in Risk Appetite Frameworks and IT Infrastructure.
(December 2010).
7. International Finance Corporation (IFC). Risk Taking: A Corporate Governance Perspective. (June 2012).
2014 Energy Risk Professional (ERP) Examination Study Guide
2014 Global Association of Risk Professionals. All rights reserved. 9
CURRENT ISSUES IN ENERGY
A separate Current Issues in Energy section has been removed from the 2014 ERP Study Guide. A number of readings that
reflect current and ongoing issues and trends in various sectors of the global energy markets have been added to comple-
ment the specific sections they pertain to throughout the 2014 Study Guide.
Deletions:
1. Bassam Fattouh and James Henderson. The Impact of Russias Refinery Upgrade Plans on Global Fuel Oil Markets.
(The Oxford Institute for Energy Studies).
2. Ernst & Young. The Oil Downstream: Vertically Challenged?
3. Michael Ratner, Paul Belkin, and Jim Nochal. Europes Energy Security: Options and Challenges to Natural Gas Supply
Diversification. (U.S. Congressional Research Service).
4. Frank Huntowski, Aaron Patterson, and Michael Schnitzer. Negative Electricity Prices and the Production Tax Credit.
(The Northbridge Group).
5. Shaun Ledgerwood, Gary Taylor, Romkaew Broehm and Dan Arthur. Losing Money to Increase Profits: A Proposed
Framework for Defining Market Manipulation. (The Brattle Group, March 2011).
6. Sherman & Sterling, LLP. A Corporate End-Users Handbook for Dodd-Frank Title VII Compliance.
7. Baker Botts. CFTC Adopts Final Swap Definition, Interprets Statutory Exclusion for Physical Delivery Forwards.
2014 Energy Oversight Committee (EOC) Members
Ken Abbott.........................................Morgan Stanley & Company
Richard Apostolik............................Global Association of Risk Professionals
Dr. Lawrence Austen ......................Trafigura
Gordon E. Goodman*.....................Alliance Risk Group
Jeff Jewell...........................................DTE Energy
Glenn Labhart, EOC Chair............Labhart Risk Advisors
Alessandro Mauro............................Litasco SA
Mark D. May........................................Phillips 66
Shawnie McBride .............................Direct Energy
Jeff Parke............................................Koch Industries, Inc.
Ken Robinson....................................Calpine
Michael Sell ........................................Global Association of Risk Professionals
Jonathan C. Stein.............................Hess Corporation
Dr. Chris Strickland.........................Lacima Group
Dr. Glen Swindle...............................Scoville Risk Partners
John Wengler....................................Hess Corporation
*Retired, Occidental Petroleum
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2014 Global Association of Risk Professionals. All rights reserved. 12-6-13
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 Members and
Affiliates from banks, investment management firms, government agencies, academic institutions, and corporations from more than
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certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk management via comprehensive
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