Energy Risk Professional (ERP) Exam
Question 1: What is the primary purpose of energy risk management?
A. To maximize production levels
B. To identify, assess, and mitigate risks
C. To enhance marketing strategies
D. To reduce labor costs
Answer: B
Explanation: Energy risk management is focused on the identification,
assessment, and mitigation of various risks in the energy sector.
Question 2: Which risk type involves the possibility of losses due to
adverse price movements in energy commodities?
A. Operational risk
B. Credit risk
C. Market risk
D. Regulatory risk
Answer: C
,Explanation: Market risk relates to potential losses from fluctuations in
commodity prices and other market variables.
Question 3: In the context of the energy sector, what does the term
“liquidity risk” refer to?
A. The risk of physical damage to infrastructure
B. The risk of not being able to meet short-term financial obligations
C. The risk of environmental hazards
D. The risk associated with counterparty defaults
Answer: B
Explanation: Liquidity risk is the possibility that an entity may not have
sufficient cash flow to meet its financial obligations as they come due.
Question 4: Which of the following is NOT a typical component of a risk
management framework?
A. Risk identification
B. Risk assessment
C. Risk speculation
D. Risk monitoring
,Answer: C
Explanation: Risk management frameworks include identification,
assessment, mitigation/control, and monitoring, but not speculation.
Question 5: What is a key characteristic of the spot market in energy
trading?
A. Trading of contracts for future delivery
B. Immediate delivery and payment
C. Long-term contract negotiation
D. Over-the-counter (OTC) transactions only
Answer: B
Explanation: The spot market involves transactions for immediate delivery
and payment of energy commodities.
Question 6: Which instrument is commonly used to hedge price risk in
energy markets?
A. Interest rate swap
B. Forward contract
C. Equity option
, D. Commodity-linked bond
Answer: B
Explanation: Forward contracts are widely used to lock in prices, thereby
hedging against price volatility in energy markets.
Question 7: What is the main purpose of Value at Risk (VaR) in market
risk management?
A. To determine historical returns
B. To measure potential losses in a portfolio
C. To forecast future market trends
D. To evaluate operational efficiency
Answer: B
Explanation: VaR quantifies the maximum expected loss over a specific
time period at a given confidence level.
Question 8: How does stress testing complement Value at Risk (VaR)
analysis in risk management?
A. By forecasting future revenues
B. By evaluating risk under extreme market conditions
Question 1: What is the primary purpose of energy risk management?
A. To maximize production levels
B. To identify, assess, and mitigate risks
C. To enhance marketing strategies
D. To reduce labor costs
Answer: B
Explanation: Energy risk management is focused on the identification,
assessment, and mitigation of various risks in the energy sector.
Question 2: Which risk type involves the possibility of losses due to
adverse price movements in energy commodities?
A. Operational risk
B. Credit risk
C. Market risk
D. Regulatory risk
Answer: C
,Explanation: Market risk relates to potential losses from fluctuations in
commodity prices and other market variables.
Question 3: In the context of the energy sector, what does the term
“liquidity risk” refer to?
A. The risk of physical damage to infrastructure
B. The risk of not being able to meet short-term financial obligations
C. The risk of environmental hazards
D. The risk associated with counterparty defaults
Answer: B
Explanation: Liquidity risk is the possibility that an entity may not have
sufficient cash flow to meet its financial obligations as they come due.
Question 4: Which of the following is NOT a typical component of a risk
management framework?
A. Risk identification
B. Risk assessment
C. Risk speculation
D. Risk monitoring
,Answer: C
Explanation: Risk management frameworks include identification,
assessment, mitigation/control, and monitoring, but not speculation.
Question 5: What is a key characteristic of the spot market in energy
trading?
A. Trading of contracts for future delivery
B. Immediate delivery and payment
C. Long-term contract negotiation
D. Over-the-counter (OTC) transactions only
Answer: B
Explanation: The spot market involves transactions for immediate delivery
and payment of energy commodities.
Question 6: Which instrument is commonly used to hedge price risk in
energy markets?
A. Interest rate swap
B. Forward contract
C. Equity option
, D. Commodity-linked bond
Answer: B
Explanation: Forward contracts are widely used to lock in prices, thereby
hedging against price volatility in energy markets.
Question 7: What is the main purpose of Value at Risk (VaR) in market
risk management?
A. To determine historical returns
B. To measure potential losses in a portfolio
C. To forecast future market trends
D. To evaluate operational efficiency
Answer: B
Explanation: VaR quantifies the maximum expected loss over a specific
time period at a given confidence level.
Question 8: How does stress testing complement Value at Risk (VaR)
analysis in risk management?
A. By forecasting future revenues
B. By evaluating risk under extreme market conditions
