Erp Practice Exam1-2014

2014
ERP
Examination
Practice
Exam
PRACTICE EXAM 1
2014 Global Association of Risk Professionals. All rights reserved. It is illegal to reproduce this material i
in any format without prior written approval of GARP, Global Association of Risk Professionals, Inc.
Energy Risk Professional Examination (ERP) Practice Exam 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ERP Practice Exam 1 Candidate Answer Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ERP Practice Exam 1 Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
ERP Practice Exam 1 Answer Sheet/Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ERP Practice Exam 1 Explanations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
TABLE OF CONTENTS
2014 Global Association of Risk Professionals. All rights reserved. It is illegal to reproduce this material 1
Introduction
The ERP Exam is a practice-oriented examination. Its ques-
tions are derived from a combination of theory, as set forth
in the core readings, and real-world work experience.
Candidates are expected to understand energy risk man-
agement concepts and approaches and how they would
apply to an energy risk managers day-to-day activities.
The ERP Examination is also a comprehensive examination,
testing an energy risk professional on a number of risk man-
agement concepts and approaches. It is very rare that an ener-
gy risk manager will be faced with an issue that can immedi-
ately be slotted into just one category. In the real world, an
energy risk manager must be able to identify any number of
risk-related issues and be able to deal with them efectively.
The ERP Practice Exam 1 has been developed to aid
candidates in their preparation for the ERP Examination.
This practice exam is based on a sample of actual questions
from past ERP Examinations and is suggestive of the ques-
tions that will be in the 2014 ERP Examination.
The ERP Practice Exam 1 contains 30 multiple choice
questions. Note that the 2014 ERP Examination will consist
of a morning and afternoon session, each containing 70
multiple choice questions. The practice exam is designed to
be shorter to allow candidates to calibrate their prepared-
ness for the exam without being overwhelming.
The ERP Practice Exam 1 does not necessarily cover
all topics to be tested in the 2014 ERP Examination. For
a complete list of topics and core readings, candidates
should refer to the 2014 ERP Examination Study Guide.
Core readings were selected in consultation with the Energy
Oversight Committee (EOC) to assist candidates in their
review of the subjects covered by the exam. Questions for
the ERP Examination are derived from these core readings
in their entirety. As such, it is strongly suggested that candi-
dates review all core readings listed in the 2014 ERP Study
Guide in-depth prior to sitting for the exam.
A Note About Question Content: We have included several
questions in this Practice Exam that are based on readings
that are no longer a part of the 2014 ERP curriculum.These
have been included to ofer content that has appeared on
prior ERP Exams and/or to provide fundamental concepts
and learning objectives about energy risk management that
are included in the 2014 ERP curriculum.
Suggested Use of Practice Exams
To maximize the efectiveness of the practice exams, candi-
dates are encouraged to follow these recommendations:
1. Plan a date and time to take the practice exam.
Set dates appropriately to give sufcient study/review
time for the practice exam prior to the actual exam.
2. Simulate the test environment as closely as possible.
Take the practice exam in a quiet place.
Have only the practice exam, candidate answer
sheet, calculator, and writing instruments (pencils,
erasers) available.
Minimize possible distractions from other people,
cell phones, televisions, etc.; put away any study
material before beginning the practice exam.
Allocate 3 minutes per question for the practice exam
and set an alarm to alert you when a total of 90 minutes
have passed. Complete the entire exam but note the
questions answered after the 90-minute mark.
Follow the ERP calculator policy. Candidates are only
allowed to bring certain types of calculators into the
exam room. The only calculators authorized for use
on the ERP Exam in 2014 are listed below, there will
be no exceptions to this policy. You will not be allowed
into the exam room with a personal calculator other
than the following: Texas Instruments BA II Plus
(including the BA II Plus Professional), Hewlett Packard
12C (including the HP 12C Platinum and the Anniversary
Edition), Hewlett Packard 10B II, Hewlett Packard 10B II+
and Hewlett Packard 20B.
3. After completing the ERP Practice Exam 1
Calculate your score by comparing your answer
sheet with the practice exam answer key. Only
include questions completed within the rst 90
minutes in your score.
Use the practice exam Answers and Explanations to
better understand the correct and incorrect answers
and to identify topics that require additional review.
Consult referenced core readings to prepare for
the exam.
Remember: pass/fail status for the actual exam is
based on the distribution of scores from all candi-
dates, so use your scores only to gauge your own
progress and level of preparedness.
Energy Risk
Professional(ERP
)
Examination
Practice Exam 1
Answer Sheet
a. b. c. d.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
a. b. c. d.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Correct way to complete
1.
Wrong way to complete
1.

Energy Risk
Professional(ERP
)
Examination
Practice Exam 1
Questions
1. The market risk manager for a refinery is considering the purchase of a collar for margin protection and uses
the following price data for options on NYMEX RBOB futures contracts to assess the economics of the trans-
action:
RBOB Strike Price Call Premium Put Premium
(USD/bbl) (USD) (USD)
3.03 0.1461 0.1209
3.07 0.1305 0.1407
Assuming the NYMEX RBOB futures contract is trading at USD 3.05, how would the risk manager structure a
collar to best manage earnings volatility in the refiners operations?
a. Buy put options @ USD 3.03 strike and sell call options @ USD 3.07 strike
b. Sell put options @ USD 3.03 strike and buy call options @ USD 3.07 strike
c. Buy put options @ USD 3.07 strike and sell call options @ USD 3.03 strike
d. Sell put options @ USD 3.07 strike and buy call options @ USD 3.03 strike
2. Which of the following long option positions, executed with the referenced counterparties, contains the great-
est potential for wrong-way risk?
a. At-the-money call option on an oil future with a BBB rated oil producer
b. Out-of-the-money put option on an oil future with a BBB rated shipping company
c. At-the-money put option on an oil future with an AA rated shipping company
d. Out-of-the-money put option on an oil future with an AA rated oil producer
3. A state-owned electric power company in China operates several coal-fired steam generation plants. The
company purchases its fuel supply from a local coal mine that produces moist coal with a low heating value.
What type of coal has the power company most likely purchased?
a. Anthracite
b. Bituminous
c. Lignite
d. Sub-Bituminous
6 2014 Global Association of Risk Professionals. All rights reserved. It is illegal to reproduce this material
4. Markus Frackus has purchased a daily on-peak call option quote for 100 MW to protect against on-peak elec-
tricity price spikes in the PJM market during the month of July. The option has a strike price of USD 100/MWh
with a premium of USD 10/MWh per day. Markus forecasts there will be two days when on-peak prices will
spike to USD 500/MWh and USD 700/MWh respectively (the on-peak price is usually less than USD 100/MWh).
What will be the profit on the option strategy assuming there are 20 business days in the month and 16 on-peak
hours per day?
a. USD 320,000
b. USD 960,000
c. USD 1,280,000
d. USD 1,600,000
5. Central counterparties (CCPs) offer many risk management benefits, but they also have the potential to
increase systemic risk. What action taken by a CCP could increase the potential for a systemic risk event?
a. Invoking netting agreements on trades that are in default.
b. Reducing margin requirements on a commodity with low volatility and high liquidity.
c. Conducting an auction to replace positions that are in default.
d. Increasing margin requirements on a commodity with large, highly concentrated positions.
6. NewGas Asia is a joint public/private partnership created to develop a newly-discovered natural gas field and
LNG export terminal in a politically-stable South Asian nation. What pricing methodology will help ensure a
fair market price for the countrys LNG exports?
a. Link LNG exports to fixed-for-floating swaps that allow for future price adjustments.
b. Link LNG exports to an index based on a basket of Asian crude oils.
c. Link LNG exports to average long-term bilateral natural gas contracts in the region.
d. Link LNG export prices to the NYMEX Henry Hub contract.
7. Chinopec Refinery, a very complex refinery, is the largest producer of refined petroleum products for the
Chinese market. Chinopec has long-term crude oil supply contracts with several crude oil producers in the
Persian Gulf, Venezuela, and West Africa. What type of shipping arrangement will offer Chinopec the greatest
economic flexibility and control over its product inventory?
a. CIF
b. DES
c. EFP
d. FOB
8. Zephyr Energy is evaluating the economics of a pumped hydro storage facility that it will use to store excess
power during off-peak hours for distribution later during on-peak periods. Calculate the facilitys projected
operating margin using the following historical price data and assuming that the plants round trip efficiency
is 70% (i.e., 30% of the input fuel is consumed by the storage facility):
Average off-peak electricity price for past 5 years: USD 41.20/MWh
Average on-peak electricity price for past 5 years: USD 54.50/MWh
a. USD 11.62/MWh
b. USD 4.09/MWh
c. -USD 4.36/MWh
d. -USD 13.37/MWh
Questions 9- 10 use the information below:
A credit analyst at a regional commercial bank has been asked to assess the credit fundamentals related to
four different energy companies. To complete the analysis the analyst has assembled the following data from
the most recently published balance sheet for each entity:
Balance Sheet (in Millions USD) Company A Company B Company C Company D
Cash 1,675 5,643 7,610 15,376
Short-term investments 1,767 8,259 5,659 5,297
Accounts receivable 888 1,337 4,296 6,489
Inventory 4,467 21,785 2,145 45,832
Total current assets: 8,797 37,024 19,710 72,994
Property, plant and equipment 13,370 17,812 3,899 27,432
Total assets 22,167 54,836 23,609 100,426
Total current liabilities 5,770 12,893 4,252 48,659
Long term debt 10,000 15,555 3,210 0
Total liabilities 16,770 28,448 7,462 48,659
Total shareholder equity 6,397 26,388 16,147 51,767
9. Using the Quick Ratio as a guideline, which company has the highest relative short-term liquidity risk?
a. Company A
b. Company B
c. Company C
d. Company D
10. Which of the following relationships will provide the best measure of financial leverage used by each company?
a. Total Liabilities
Total Shareholder Equity
b. Long Term Debt
Total Current Assets
c. Long Term Assets
Total Current Liabilities
d. Total LiabilitiesLong Term Debt
Total Assets
11. Coastal Petroleum (CP) operates refineries at strategic locations along the east and west coasts of Canada.
After consulting with the finance team, the risk management group implements a strategy to hedge market
risk using crack spreads.
Use the following NYMEX futures data to price the November RBOB futures contract based on a 3:2:1 crack
spread valued at USD 24.30/bbl.
November WTI futures price: USD 103.60/bbl
November Heating Oil futures price: USD 3.43/gal
a. USD 1.96/gal
b. USD 2.85/gal
c. USD 3.21/gal
d. USD 3.70/gal
12. Consider an African nation that exports domestically-produced crude oil. The crude has an API of 36 and a
sulfur content of 0.73%. What best describes the pricing of the countrys crude oil exports assuming the
London ICE Brent futures contract is used as the benchmark price?
a. Domestically produced crude oil should be priced at a discount to the Brent crude oil contract.
b. Domestically produced crude oil should be priced at parity to the Brent crude oil contract.
c. Domestically produced crude oil should be priced at a premium to the Brent crude oil contract.
d. Domestically produced crude oil and Brent crude have little correlation making the Brent futures contract
a poor benchmark.
13. A local utility company contracts to purchase one hour of load from the grid in the day-ahead market under
the following terms:
250 MW @ USD 52/MWh
What net settlement payment is required from the RTO under a contract for differences (CfD), assuming the
spot market price for electricity is USD 70/MWh and the actual load for the utility is 300 MW for the con-
tracted hour?
a. USD 900
b. USD 2,600
c. USD 3,050
d. USD 3,500
14. Use the daily high and low temperatures below to calculate Cooling Degree Days (CDD) for the following period:
High Low Average
Temperature Temperature Temperature
71F 62F 66.5F
75F 63F 69.0F
72F 65F 68.5F
69F 67F 68F
64F 61F 62.5F
65F 59F 62F
64F 58F 61F
a. 9.5
b. 12
c. 14.5
d. 17
15. Assuming the correlation between Brent Crude Oil and Newcastle Coal is zero, what is the probability that
Brent Crude Oil and Newcastle Coal prices will both increase more than 2% on a given day given the following
probabilities:
P [Brent Crude Oil price increases more than 2%]: 40%
P [Newcastle Coal price increases more than 2%]: 15%
a. 6%
b. 9%
c. 11%
d. 55%
16. A hydroskimming refinery in South America uses the daily Brent crude oil spot price as a benchmark reference for
its crude oil feedstock. Assuming the spot Brent price is USD 113.29/bbl, the refinery would most likely purchase
which of the following crudes?
a. Canadian Oil Sands (bitumen) at USD 78.06/bbl
b. Mexico Mayan Heavy at USD 101.30/bbl
c. West Texas Sour at USD 114.88/bbl
d. Nigerian Bonny Light at USD 121.87/bbl
17. Why is the time required for physical settlement of energy commodities typically longer than financially settled
transactions?
a. Higher SDR reporting requirements
b. Longer re-margining periods
c. Lower liquidity
d. More frequent reconciliations
18. Based on the following historical weekly price return data, what is the best estimate of annual volatility on the
SP15 on-peak power futures contract?
Time Period Average Weekly Return (Log of
Price (USD/MWh) Price Changes)
Week 1 97.50
Week 2 95.00 -0.0260
Week 3 116.95 0.2079
Week 4 101.15 -0.1451
Variance 97.26 0.0323
Standard Deviation 9.86 0.1796
a. 23.3%
b. 61.6%
c. 129.5%
d. 135.5%
19. What is meant by the term stranded gas?
a. A gas deposit that cannot be commercially developed due to an ownership dispute.
b. A gas deposit located in a region with low demand and no access to transport or export facilities.
c. The volume of gas required after extraction to maintain operating pressure at an underground storage facility.
d. The volume of gas related to a default in a take-or-pay contract.
20. Which of the following depicts the relationship between the rated power of an onshore wind turbine and the
prevailing wind speed?
21. A risk manager at Krakov Airlines is analyzing changes in the EU Emissions Trading Scheme (ETS) program
leading up to Phase III of the ETS. What action will Krakov be required to take to comply with the revised
terms of the ETS?
a. No changes are required for Krakov to comply with the revised terms of the ETS.
b. Acquire allowances to cover its carbon emissions under the new terms of the ETS.
c. Install fuel-efficient engines in all its planes to comply with the new terms of the ETS.
d. Acquire LULUCF credits to comply with the new terms of the ETS.
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22. How can Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) be applied to best achieve an
organizations risk management objectives?
a. Use KPIs exclusively to develop an effective forward looking assessment of trends in operational risk factors.
b. Integrate KPI objectives and KRI limits to create a single comprehensive risk-weighted metric.
c. Monitor KRIs to assess shifts in risk exposure and adjust business strategy and operational procedures to
better meet return on risk objectives identified by KPIs.
d. Replace KPIs with KRIs and adjust company-wide risk capital allocations to account for the change in risk
monitoring procedures.
23. Consider a European country that relies on the following mix of power generation sources to meet its domestic
electricity requirements:
Wind - 35%
Gas - 30%
Coal - 10%
Nuclear - 20%
Hydro - 5%
The national energy policy dictates that the country will actively expand its wind generation capacity. What
best describes the economics of wind generation as it accounts for a larger portion of the countrys total
domestic capacity?
a. High marginal costs and higher incremental balancing costs
b. High marginal costs and lower incremental balancing costs
c. Low marginal costs and higher incremental balancing costs
d. Low marginal costs and lower incremental balancing costs
24. Calculate the difference in value between the 1-day 99% VaR and 1-day 95% VaR on the following position,
assuming a normal distribution for daily price returns (round answer to nearest thousand)?
December 2013 Brent Crude Oil Futures Contracts: 50
Daily volatility: 1.92%
Closing Brent Futures Price: USD 118.55
a. 71,000
b. 79,000
c. 107,000
d. 187,000
25. What perceived economic benefit would cause an oil refiner to prefer holding physical inventories of crude as
an alternative to buying physical barrels of crude oil for future delivery, when crude oil futures prices are in
backwardation?
a. Convenience yield
b. Cost of carry
c. Mean reversion trends
d. Seasonality
26. Consider a long position in 100 NYMEX RBOB October 2012 futures contracts. The initial margin requirement
is USD 2 million with a minimum margin balance of USD 1.5 million. Assume the account is open until
September 11 with no withdrawals. On what dates will additional margin need to be posted assuming the fol-
lowing daily change in the value of the position?
Date RBOB (USD/gal) Gain/Loss per 100 contracts
September 4 4.05
September 5 3.89 -672,000
September 6 3.77 -504,000
September 7 3.79 84,000
September 10 3.62 -714,000
September 11 3.57 -210,000
a. September 5
b. September 5 and 6
c. September 5, 6 and 10
d. September 5, 6, 10 and 11
27. Calculate the spark spread for a combined cycle natural gas turbine plant based on the following assumptions:
Average plant heat rate: 8,500 Btu/kWh
Current price of natural gas: USD 5.00/MMBtu
Current price of electricity: USD 30.00/MWh
a. USD 0.0125/kWh
b. USD 0.1250/kWh
c. USD -0.0125/kWh
d. USD -0.1250/kWh
28. What best describes the drift term in a single-factor, mean reverting model?
a. A deterministic variable that converges toward zero as the spot price moves closer to the forward price.
b. A deterministic variable that is highly correlated to the spread between the spot and forward price as the
spot price moves closer to the forward price.
c. A stochastic variable that is highly correlated to the spread between the spot and forward price as the
spot price moves closer to the long-term equilibrium price.
d. A stochastic variable that converges towards zero as the spot price moves closer to the long-term
equilibrium price.
29. What best explains the differentiation between risk appetite and risk tolerance?
a. Risk appetite is a willingness to embrace risk, while risk tolerance is an aversion to enduring risk.
b. Risk appetite expresses a range of risk levels an organization is willing to endure, while risk tolerance is a
single definitive figure.
c. Risk appetite is a measure of how much risk an organization is willing to take on, while risk tolerance is
used to communicate a level of acceptable risk.
d. Risk appetite cannot be derived empirically, while risk tolerance can.
30. A credit risk analyst notices that data is missing from the following credit report:
Bond Name Koryo Energy
Exposure ?
Recovery rate 27%
Loss given default USD 4,506,700
Expected loss USD 3,372,800
What is the original exposure on the Koryo Energy bond position?
a. USD 4,620,270
b. USD 6,173,500
c. USD 12,491,800
d. USD 16,691,500
Energy Risk
Professional(ERP
)
Examination
Practice Exam 1
Answers
a. b. c. d.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
a. b. c. d.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Correct way to complete
1.
Wrong way to complete
1.
Energy Risk
Professional(ERP
)
Examination
Practice Exam 1
Explanations
1. The market risk manager for a refinery is considering the purchase of a collar for margin protection and uses
the following price data for options on NYMEX RBOB futures contracts to assess the economics of the trans-
action:
RBOB Strike Price Call Premium Put Premium
(USD/bbl) (USD) (USD)
3.03 0.1461 0.1209
3.07 0.1305 0.1407
Assuming the NYMEX RBOB futures contract is trading at USD 3.05, how would the risk manager structure a
collar to best manage earnings volatility in the refiners operations?
a. Buy put options @ USD 3.03 strike and sell call options @ USD 3.07 strike
b. Sell put options @ USD 3.03 strike and buy call options @ USD 3.07 strike
c. Buy put options @ USD 3.07 strike and sell call options @ USD 3.03 strike
d. Sell put options @ USD 3.07 strike and buy call options @ USD 3.03 strike
Correct answer: a
Explanation: The correct answer is a. The collar will help the refiner to hedge price risk and, by extension,
margins on its refining operation for the month of October. In this case, the refiner will lock in a range of sell-
ing prices between 3.03 and 3.07 (less any cost of implementing the trade). If the RBOB price rallies over
3.07, the sold call will be assigned to the refiner so the refiner will realize an effective price of 3.07. If the price
falls below 3.03, the refiner can exercise the put option to lock in the price at that level.
Reading reference: Vincent Kaminski, Energy Markets, Chapter 18.
2. Which of the following long option positions, executed with the referenced counterparties, contains the great-
est potential for wrong-way risk?
a. At-the-money call option on an oil future with a BBB rated oil producer
b. Out-of-the-money put option on an oil future with a BBB rated shipping company
c. At-the-money put option on an oil future with an AA rated shipping company
d. Out-of-the-money put option on an oil future with an AA rated oil producer
Correct answer: d
Explanation: Wrong-way risk arises in cases when the credit risk of the counterparty increases as your expo-
sure to that counterparty increases. In other words, there is a positive correlation between your exposure to a
counterparty and the credit risk (or default probability) of that counterparty. Because the counterparty is an
oil producer, when oil prices fall and the put option becomes more valuable, the credit risk of the oil producer
is increasing. This wrong-way risk is exacerbated by the fact that the put option is out-of-the-money, since it
will take a larger decrease in the price of oil, and therefore a greater increase in the oil producers credit risk,
to make the option in-the-money.
In comparison, a shipping company uses oil as an input, so when oil prices decrease (all else being equal), the
shipping company is much better off. Therefore, an out of the money put option on oil with a shipping com-
pany as a counterparty will generally have right-way risk.
Reading reference: Jon Gregory. Counterparty Credit Risk and Credit Value Adjustment: A Continuing
Challenge for Global Financial Markets, Chapter 15.
3. A state-owned electric power company in China operates several coal-fired steam generation plants. The
company purchases its fuel supply from a local coal mine that produces moist coal with a low heating value.
What type of coal has the power company most likely purchased?
a. Anthracite
b. Bituminous
c. Lignite
d. Sub-Bituminous
Correct answer: c
Explanation: The correct answer is c; lignite is a type of soft coal with the lowest carbon content of the four
major types and high moisture content.
Reading reference: Vincent Kaminski, Energy Markets, Chapter 26 page 798.
4. Markus Frackus has purchased a daily on-peak call option quote for 100 MW to protect against on-peak elec-
tricity price spikes in the PJM market during the month of July. The option has a strike price of USD 100/MWh
with a premium of USD 10/MWh per day. Markus forecasts there will be two days when on-peak prices will
spike to USD 500/MWh and USD 700/MWh respectively (the on-peak price is usually less than USD 100/MWh).
What will be the profit on the option strategy assuming there are 20 business days in the month and 16 on-peak
hours per day?
a. USD 320,000
b. USD 960,000
c. USD 1,280,000
d. USD 1,600,000
Correct answer: c
Explanation: Answer c is correct, using the following formula:
Premium = USD 320,000 or (USD 10 x 100 MW x 16 x 20)
Option Payoff = USD 1,600,000 or ((500-100+700-100) x16 x100)
Option Profit = USD 1,280,000 or (USD 1,600,000-USD 320,000)
Reading reference: IEA, The Mechanics of the Derivatives Markets: What They Are and How They Function.
(Special Supplement to the Oil Market Report, April 2011).
5. Central counterparties (CCPs) offer many risk management benefits, but they also have the potential to
increase systemic risk. What action taken by a CCP could increase the potential for a systemic risk event?
a. Invoking netting agreements on trades that are in default.
b. Reducing margin requirements on a commodity with low volatility and high liquidity.
c. Conducting an auction to replace positions that are in default.
d. Increasing margin requirements on a commodity with large, highly concentrated positions.
Correct answer: d
Explanation: An increase in margin requirements by a CCP could create destabilizing market impacts and
therefore add systemic risk. An example of this is a security where large concentrated positions are held. If
the CCP were to increase the margin requirement, firms holding these positions might be placed into margin
calls which could force them to sell the target security, creating even greater market impact and imposing
strains on the funding system and market liquidity.
Reading reference: Jon Gregory. Counterparty Credit Risk: A Continuing Challenge for Global Financial
Markets, Chapter 7, page 110.
6. NewGas Asia is a joint public/private partnership created to develop a newly-discovered natural gas field and
LNG export terminal in a politically-stable South Asian nation. What pricing methodology will help ensure a
fair market price for the countrys LNG exports?
a. Link LNG exports to fixed-for-floating swaps that allow for future price adjustments.
b. Link LNG exports to an index based on a basket of Asian crude oils.
c. Link LNG exports to average long-term bilateral natural gas contracts in the region.
d. Link LNG export prices to the NYMEX Henry Hub contract.
Correct answer: b
Explanation: To improve the ability to hedge and to more accurately reflect market prices, gas contracts have
in the past been indexed to a basket of oil prices, making b the correct answer. The other answers are incor-
rect: answer a is not the proper application of a Fixed-for-Floating swap; long bilateral contracts would not be
an accurate source for pricing information; and Henry Hub serves the US domestic market so it too would not
be an accurate measure of market forces at play in the Pacific.
Reading reference: Vivek Chandra, Fundamentals of Natural Gas: An International Perspective, Chapter 4, page 117.
7. Chinopec Refinery, a very complex refinery, is the largest producer of refined petroleum products for the
Chinese market. Chinopec has long-term crude oil supply contracts with several crude oil producers in the
Persian Gulf, Venezuela, and West Africa. What type of shipping arrangement will offer Chinopec the greatest
economic flexibility and control over its product inventory?
a. CIF
b. DES
c. EFP
d. FOB
Correct answer: d
Explanation: The correct answer is d: under the terms of the FOB contract, the buyer is responsible for
arranging shipping and insurance charges providing flexibility in making these arrangements in the manner
that they wish and allowing for the possibility of saving money.
Reading reference: Andrew Inkpen and Michael Moffett. The Global Oil and Gas Industry: Management,
Strategy and Finance, Chapter 9, pages 346-347.
8. Zephyr Energy is evaluating the economics of a pumped hydro storage facility that it will use to store excess
power during off-peak hours for distribution later during on-peak periods. Calculate the facilitys projected
operating margin using the following historical price data and assuming that the plants round trip efficiency
is 70% (i.e., 30% of the input fuel is consumed by the storage facility):
Average off-peak electricity price for past 5 years: USD 41.20/MWh
Average on-peak electricity price for past 5 years: USD 54.50/MWh
a. USD 11.62/MWh
b. USD 4.09/MWh
c. -USD 4.36/MWh
d. -USD 13.37/MWh
Correct answer: c
Explanation: The correct answer is c. Since the plant has a 70% operating efficiency, to determine its operat-
ing cost we multiply the off-peak electricity price by 1.4285 (or 1/0.7) to account for the 70% efficiency of the
fill cycle (41.20 x 1.4285 = 58.86). USD 58.86 represents the production cost for their electricity, but when this
is subtracted from the average on-peak price of USD 54.50, the result is a margin of - USD 4.36. The pumped
hydro plant would thus not be profitable.
Reading reference: IPCC, IPCC Special Report on Renewable Energy Sources and Climate Change
Mitigation, Chapter 5: Hydropower, pages 451-452, 459.
Questions 9- 10 use the information below:
A credit analyst at a regional commercial bank has been asked to assess the credit fundamentals related to
four different energy companies. To complete the analysis the analyst has assembled the following data from
the most recently published balance sheet for each entity:
Balance Sheet (in Millions USD) Company A Company B Company C Company D
Cash 1,675 5,643 7,610 15,376
Short-term investments 1,767 8,259 5,659 5,297
Accounts receivable 888 1,337 4,296 6,489
Inventory 4,467 21,785 2,145 45,832
Total current assets: 8,797 37,024 19,710 72,994
Property, plant and equipment 13,370 17,812 3,899 27,432
Total assets 22,167 54,836 23,609 100,426
Total current liabilities 5,770 12,893 4,252 48,659
Long term debt 10,000 15,555 3,210 0
Total liabilities 16,770 28,448 7,462 48,659
Total shareholder equity 6,397 26,388 16,147 51,767
9. Using the Quick Ratio as a guideline, which company has the highest relative short-term liquidity risk?
a. Company A
b. Company B
c. Company C
d. Company D
Correct answer: d
Explanation: The Quick Ratio is a more conservative form of the Current Ratio which assumes that a firm will
not be able to easily liquidate its inventory, and in a crisis that a firm will not get full market value for its
inventory. Hence it is a measure of the liquid assets a firm has available to pay back its current obligations.
The formula for the Quick Ratio is as follows:
Current assetsInventory
Current Liabilities
In this case, Company D has the lowest Quick Ratio, at (72,994 45,832) / 48,659, or 0.52. This is because
most of Company Ds current assets are held as inventory, which is not easily liquidated.
The Quick Ratios for companies A, B and C are 0.86, 1.18, and 4.13 respectively.
Reading reference: Betty Simkins and Russell Simkins, eds. Energy Finance and Economics: Analysis and
Valuation, Risk Management, and the Future of Energy, Chapter 9, page 197.
10. Which of the following relationships will provide the best measure of financial leverage used by each company?
a. Total Liabilities
Total Shareholder Equity
b. Long Term Debt
Total Current Assets
c. Long Term Assets
Total Current Liabilities
d. Total LiabilitiesLong Term Debt
Total Assets
Correct answer: a
Explanation: One of the most important debt management ratios is the debt/equity ratio, which assesses the
financial leverage of the firm by comparing its level of debt financing to its total net worth. This is expressed
as Total liabilities/Total net worth, where total net worth is equal to the firms total shareholder equity.
Reading reference: Betty Simkins and Russell Simkins, eds. Energy Finance and Economics: Analysis and
Valuation,Risk Management, and the Future of Energy, Chapter 9, page 200.
11. Coastal Petroleum (CP) operates refineries at strategic locations along the east and west coasts of Canada.
After consulting with the finance team, the risk management group implements a strategy to hedge market
risk using crack spreads.
Use the following NYMEX futures data to price the November RBOB futures contract based on a 3:2:1 crack
spread valued at USD 24.30/bbl.
November WTI futures price: USD 103.60/bbl
November Heating Oil futures price: USD 3.43/gal
a. USD 1.96/gal
b. USD 2.85/gal
c. USD 3.21/gal
d. USD 3.70/gal
Correct answer: b
Explanation: The correct answer is b. A 3:2:1 crack spread is three barrels of crude oil to two barrels of gaso-
line and one barrel of heating oil. Here the per barrel crack spread of USD 24.30 is given. Multiplying this by
three equals USD 72.90. The cost of crude oil is also multiplied by 3 (for the 3 barrels used to calculate the
spread): 103.60 x 3 = 310.80, when the refining margin (72.90) is added, the result is 383.70.
The price of the heating oil is given as 3.43/gal, multiplying this by 42 (gallons in a barrel) gives an amount of
USD 144.06. Subtracting this from USD 383.70 gives a result of USD 239.40, the cost of two barrels of gaso-
line. Dividing this by 42 (number of gallons in a barrel) and the 2 (the factor for gasoline in a crack spread)
gives a per gallon RBOB futures cost of USD 2.85/gal.
Reading reference: Andrew Inkpen and Michael Moffett. The Global Oil and Gas Industry: Management,
Strategy and Finance, Chapter 12, page 459.
12. Consider an African nation that exports domestically-produced crude oil. The crude has an API of 36 and a
sulfur content of 0.73%. What best describes the pricing of the countrys crude oil exports assuming the
London ICE Brent futures contract is used as the benchmark price?
a. Domestically produced crude oil should be priced at a discount to the Brent crude oil contract.
b. Domestically produced crude oil should be priced at parity to the Brent crude oil contract.
c. Domestically produced crude oil should be priced at a premium to the Brent crude oil contract.
d. Domestically produced crude oil and Brent crude have little correlation making the Brent futures contract
a poor benchmark.
Correct answer: a
Explanation: Benchmark crudes serve as a pricing standard against which the value of other crude oils can be
set. This crude oil would be classified as intermediate crude with a sulfur level slightly higher than Brent, mak-
ing it likely to sell at a small discount to Brent.
Reading reference: Bassam Fattouh, An Anatomy of the Crude Oil Pricing System (The Oxford Institute for
Energy Studies).
13. A local utility company contracts to purchase one hour of load from the grid in the day-ahead market under
the following terms:
250 MW @ USD 52/MWh
What net settlement payment is required from the RTO under a contract for differences (CfD), assuming the
spot market price for electricity is USD 70/MWh and the actual load for the utility is 300 MW for the con-
tracted hour?
a. USD 900
b. USD 2,600
c. USD 3,050
d. USD 3,500
Correct answer: d
Explanation: The correct answer is d. Under a CfD market agreement, the amount beyond the contracted vol-
ume is settled at the spot market price; in this case 50 MWh (300MW-250MW) at USD 70/MWh, or USD
3,500. The other 250 MW are paid for at the rate of USD 52/MWh as specified in the nominated contract and
are not part of the CfD settlement.
a - (70-52)*50
b - (50*52)
c - [(52+70)/2]*50.
Reading reference: Steven Stoft, Power System Economics: Designing Markets for Electricity, Chapter 5.3,
Congestion Pricing Fundamentals; Chapter 5.4, Congestion Pricing Method.
14. Use the daily high and low temperatures below to calculate Cooling Degree Days (CDD) for the following period:
High Low Average
Temperature Temperature Temperature
71F 62F 66.5F
75F 63F 69.0F
72F 65F 68.5F
69F 67F 68F
64F 61F 62.5F
65F 59F 62F
64F 58F 61F
a. 9.5
b. 12
c. 14.5
d. 17
Correct answer: b
Explanation: The correct answer is b. Cooling Degree Days are the difference between the daily average tem-
peratures and 65F, as long as the average temperature is greater than 65 degrees. If the average temperature
is 65 degrees or less on a given day then the CDDs for that day are zero. The average temperatures for this
week are: 66.5, 69, 68.5, 68, 62.5, 62 and 61, for a total of 12 CDDs for the week.
Reading reference: Robert McDonald, Derivatives Markets, 3rd Edition, Chapter 6.
15. Assuming the correlation between Brent Crude Oil and Newcastle Coal is zero, what is the probability that
Brent Crude Oil and Newcastle Coal prices will both increase more than 2% on a given day given the following
probabilities:
P [Brent Crude Oil price increases more than 2%]: 40%
P [Newcastle Coal price increases more than 2%]: 15%
a. 6%
b. 9%
c. 11%
d. 55%
Correct answer: a
Explanation: Correct answer is a. The joint probability of two independent events represents the product of
the probabilities for each independent outcome. In this case the joint probability is represented by P[B] *
P[D] or 6%
B is incorrect: 9% = (P[B] + P[D])/P[B] * P[D])
C is incorrect: 11% = (P[B] * P[D])/P[B] + P[D]
D in incorrect: 55% = P[B] + P[D]
Reading reference: Michael Miller. Mathematics and Statistics for Financial Risk Management. Chapter 2, page 27-28.
16. A hydroskimming refinery in South America uses the daily Brent crude oil spot price as a benchmark reference for
its crude oil feedstock. Assuming the spot Brent price is USD 113.29/bbl, the refinery would most likely purchase
which of the following crudes?
a. Canadian Oil Sands (bitumen) at USD 78.06/bbl
b. Mexico Mayan Heavy at USD 101.30/bbl
c. West Texas Sour at USD 114.88/bbl
d. Nigerian Bonny Light at USD 121.87/bbl
Correct answer: d
Explanation: The correct answer is d. The refinery is described as a hydroskimming facility making it a simple
refinery. Therefore it will yield the most gasoline by refining a light, sweet crude, which is choice d, even though
Bonny Light is being offered at a premium to Brent (which it typically is). West Texas Sour is a medium weight
oil that will require additional processing to remove the sulfur impurities, while the yield from the heavy Mayan
crude will seriously reduce the amount of gasoline produced, both of which will negate the discount offered for
these crudes. It is unlikely the refinery would even be able to process the raw Canadian bitumen.
Reading reference: William L. Leffler. Petroleum Refining in Nontechnical Language, 3rd Edition, Chapter 20.
17. Why is the time required for physical settlement of energy commodities typically longer than financially settled
transactions?
a. Higher SDR reporting requirements
b. Longer re-margining periods
c. Lower liquidity
d. More frequent reconciliations
Correct answer: d
Explanation: There are longer settlement times for physically settled commodities because of a greater
amount of potential reconciliations. Reconciliation has to wait until the transportation statements come in,
and in cases where the actual delivery volume is different than the contracted volume (due to losses during
transportation), a true up or actualization might have to be made. Physical futures typically settle on the
20th or 25th day, while financial derivatives settle on the 5th or 10th day.
Reading reference: ISDA, OTC Commodity Derivatives Trade Processing Lifecycle Events, pages 15-16.
18. Based on the following historical weekly price return data, what is the best estimate of annual volatility on the
SP15 on-peak power futures contract?
Time Period Average Weekly Return (Log of
Price (USD/MWh) Price Changes)
Week 1 97.50
Week 2 95.00 -0.0260
Week 3 116.95 0.2079
Week 4 101.15 -0.1451
Variance 97.26 0.0323
Standard Deviation 9.86 0.1796
a. 23.3%
b. 61.6%
c. 129.5%
d. 135.5%
Correct answer: c
Explanation: Answer c is the correct answer. As per the text, historical volatility is derived by multiplying the
standard deviation of natural log price changes by the square root of 52, the factor required to annualize the
weekly prices observed in the sample.
Reading reference: Les Clewlow and Chris Strickland, Energy Derivatives: Pricing and Risk Management,
Chapter 3.
19. What is meant by the term stranded gas?
a. A gas deposit that cannot be commercially developed due to an ownership dispute.
b. A gas deposit located in a region with low demand and no access to transport or export facilities.
c. The volume of gas required after extraction to maintain operating pressure at an underground storage facility.
d. The volume of gas related to a default in a take-or-pay contract.
Correct answer: b
Explanation: The correct answer is b. Stranded gas is a term used to refer to any deposits of natural gas
located in areas of low demand and/or without access to an export facility, such as a pipeline or LNG terminal.
The gas is said to be stranded since it cannot be brought to market, or no local market exists for it. Since
pipelines and LNG terminals are capital intensive, much care must be used in evaluating the economic poten-
tial of a stranded gas field. Note: choice c is the correct definition of cushion gas.
Reading reference: PriceWaterhouseCoopers. Todays LNG Market Dynamics.
20. Which of the following depicts the relationship between the rated power of an onshore wind turbine and the
prevailing wind speed?
Correct answer: b
Explanation: Correct answer is b. At low levels of wind speed the turbine has not reached its cut-in speed so
does not produce any power at all. Once it reaches the cut in speed, the energy produced by the turbine
increases slowly at first and then more and more quickly. Finally, at a certain wind speed (typically between 11
and 15 meters per second) the turbine reaches 100% of its rated power and continues to operate at that level
until it reaches its cut off point at very fast wind speeds (typically 25 m/s or higher).
Reading reference: IPCC, Chapter 7, Wind Energy, page 536.
0 5 10 15 20
Wind Speed (m/s)
100%
50%
0%
P
e
r
c
e
n
t
a
g
e

o
f

R
a
t
e
d

P
o
w
e
r
a.
0 5 10 15 20
Wind Speed (m/s)
100%
50%
0%
P
e
r
c
e
n
t
a
g
e

o
f

R
a
t
e
d

P
o
w
e
r
c.
0 5 10 15 20
Wind Speed (m/s)
100%
50%
0%
P
e
r
c
e
n
t
a
g
e

o
f

R
a
t
e
d

P
o
w
e
r
b.
0 5 10 15 20
Wind Speed (m/s)
100%
50%
0%
P
e
r
c
e
n
t
a
g
e

o
f

R
a
t
e
d

P
o
w
e
r
d.
21. A risk manager at Krakov Airlines is analyzing changes in the EU Emissions Trading Scheme (ETS) program
leading up to Phase III of the ETS. What action will Krakov be required to take to comply with the revised
terms of the ETS?
a. No changes are required for Krakov to comply with the revised terms of the ETS.
b. Acquire allowances to cover its carbon emissions under the new terms of the ETS.
c. Install fuel-efficient engines in all its planes to comply with the new terms of the ETS.
d. Acquire LULUCF credits to comply with the new terms of the ETS.
Correct answer: b
Explanation: As part of the changes leading up to the implementation of Phase III of the EU ETS, the aviation
industry was included for the first time in the ETS in 2012, the last year of Phase II. Therefore Krakov should
acquire carbon allowances to cover its carbon emissions. LULUCF (land use, land-use change and forestry)
credits are not acceptable to cover allowance requirements in the EU ETS program.
Reading reference: Larry Parker, Climate Change and the EU Emissions Trading Scheme: Looking to 2020.
22. How can Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) be applied to best achieve an
organizations risk management objectives?
a. Use KPIs exclusively to develop an effective forward looking assessment of trends in operational risk factors.
b. Integrate KPI objectives and KRI limits to create a single comprehensive risk-weighted metric.
c. Monitor KRIs to assess shifts in risk exposure and adjust business strategy and operational procedures to
better meet return on risk objectives identified by KPIs.
d. Replace KPIs with KRIs and adjust company-wide risk capital allocations to account for the change in risk
monitoring procedures.
Correct answer: c
Explanation: The correct answer is c. One problem with the use of KPIs for risk management is that they are
backward-looking: they will only show how well the portfolio has met pre-determined goals. KRIs are an ongo-
ing process of monitoring the portfolio performance to ensure that it stays within pre-determined risk measure-
ments. Using them together as described in answer c is an effective risk-management strategy. Adjustments to
the portfolio can be made in accordance to the KRIs that can ultimately help the portfolio reach the KPIs.
Reading reference: John Fraser and Betty Simkins, Enterprise Risk Management: Todays Leading Research
and Best Practices for Tomorrows Executives, Chapter 8, page 128.
23. Consider a European country that relies on the following mix of power generation sources to meet its domestic
electricity requirements:
Wind - 35%
Gas - 30%
Coal - 10%
Nuclear - 20%
Hydro - 5%
The national energy policy dictates that the country will actively expand its wind generation capacity. What
best describes the economics of wind generation as it accounts for a larger portion of the countrys total
domestic capacity?
a. High marginal costs and higher incremental balancing costs
b. High marginal costs and lower incremental balancing costs
c. Low marginal costs and higher incremental balancing costs
d. Low marginal costs and lower incremental balancing costs
Correct answer: c
Explanation: The correct answer is c. Wind power has very low marginal cost given its high capital intensity
and enters the merit order curve at a low level. However, given the intermittency of wind power production
this will lead to higher balancing costs as more wind power enters the system.
Reading reference (new): IPCC, IPCC Special Report on Renewable Energy Sources and Climate Change
Mitigation, Chapter 7: Wind Energy, pages 568, 583-588.
24. Calculate the difference in value between the 1-day 99% VaR and 1-day 95% VaR on the following position,
assuming a normal distribution for daily price returns (round answer to nearest thousand)?
December 2013 Brent Crude Oil Futures Contracts: 50
Daily volatility: 1.92%
Closing Brent Futures Price: USD 118.55
a. 71,000
b. 79,000
c. 107,000
d. 187,000
Correct answer: b
Explanation: The correct answer is b. The 99% VaR will use a confidence factor of 2.33 while the 95% VaR will use a
confidence factor of 1.64. Therefore the 99% VaR is: 118.55 * 50 contracts * 0.0192 * 1000 barrels / contract * 2.33 =
265,172, while the 95% VaR is: 118.55 * 50 * 0.0192 * 1000 * 1.64 = 186,645. Hence the difference is 78,500. .
Reading reference: Allan Malz, Financial Risk Management: Models, History, and Institutions (Hoboken, NJ:
John Wiley and Sons, 2011), Chapter 3.
25. What perceived economic benefit would cause an oil refiner to prefer holding physical inventories of crude as
an alternative to buying physical barrels of crude oil for future delivery, when crude oil futures prices are in
backwardation?
a. Convenience yield
b. Cost of carry
c. Mean reversion trends
d. Seasonality
Correct answer: a
Explanation: The correct answer is a; convenience yield, a perceived benefit in some circumstances in holding
physical stocks of a commodity rather than forward contracts for delivery in the future. The convenience yield is
a factor that affects the formation of forward price curves for several energy commodities, particularly crude oil.
Reading reference: Vincent Kaminski, Energy Markets, Chapter 4.
26. Consider a long position in 100 NYMEX RBOB October 2012 futures contracts. The initial margin requirement
is USD 2 million with a minimum margin balance of USD 1.5 million. Assume the account is open until
September 11 with no withdrawals. On what dates will additional margin need to be posted assuming the fol-
lowing daily change in the value of the position?
Date RBOB (USD/gal) Gain/Loss per 100 contracts
September 4 4.05
September 5 3.89 -672,000
September 6 3.77 -504,000
September 7 3.79 84,000
September 10 3.62 -714,000
September 11 3.57 -210,000
a. September 5
b. September 5 and 6
c. September 5, 6 and 10
d. September 5, 6, 10 and 11
Correct answer: c
Explanation: Whenever the account incurs a loss bringing the balance below 1.5 million, a margin call will be incurred
and the account will need to be brought back up to its initial margin requirement (not the maintenance level.)
Gain/Loss per Balance after Balance after any
Date 100 contracts Market Close Margin Call margin calls paid
September 4 2,000,000
September 5 -672,000 1,328,000 672,000 2,000,000
September 6 -504,000 1,496,000 504,000 2,000,000
September 7 84,000 2,084,000 - 2,084,000
September 10 -714,000 1,370,000 630,000 2,000,000
September 11 -210,000 1,790,000 - 1,790,000
Reading reference: IEA, The Mechanics of the Derivatives Markets: What They Are and How They Function.
(Special Supplement to the Oil Market Report, April 2011).
27. Calculate the spark spread for a combined cycle natural gas turbine plant based on the following assumptions:
Average plant heat rate: 8,500 Btu/kWh
Current price of natural gas: USD 5.00/MMBtu
Current price of electricity: USD 30.00/MWh
a. USD 0.0125/kWh
b. USD 0.1250/kWh
c. USD -0.0125/kWh
d. USD -0.1250/kWh
Correct answer: c
Explanation: Answer c is correct, the calculation for determining the spark spread in this scenario is as follows:
Spark Spread = Output Price Input Price
Output Price = USD 30/MWh x 1MWh/1000kWh = USD 0.03/kWh
Input Price = 8500 Btu/kWh x USD 5/1,000,000Btu = USD 0.0425/kWh
Therefore, the Spark Spread = -0.0125.
Reading reference: Vincent Kaminski, Energy Markets, Chapter 22, Analytical Tools.
28. What best describes the drift term in a single-factor, mean reverting model?
a. A deterministic variable that converges toward zero as the spot price moves closer to the forward price.
b. A deterministic variable that is highly correlated to the spread between the spot and forward price as the
spot price moves closer to the forward price.
c. A stochastic variable that is highly correlated to the spread between the spot and forward price as the
spot price moves closer to the long-term equilibrium price.
d. A stochastic variable that converges towards zero as the spot price moves closer to the long-term
equilibrium price.
Correct answer: d
Explanation: The correct answer is d. In a single factor model the drift term is stochastic. As S
t
approaches L,
the drift term approaches zero and the time it takes for S
t
to reach L tends to infinity (alternatively, S
t
approaches L asymptotically).
Reading reference: Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management,
Chapter 2, pages 18-19.
29. What best explains the differentiation between risk appetite and risk tolerance?
a. Risk appetite is a willingness to embrace risk, while risk tolerance is an aversion to enduring risk.
b. Risk appetite expresses a range of risk levels an organization is willing to endure, while risk tolerance is a
single definitive figure.
c. Risk appetite is a measure of how much risk an organization is willing to take on, while risk tolerance is
used to communicate a level of acceptable risk.
d. Risk appetite cannot be derived empirically, while risk tolerance can.
Correct answer: c
Explanation: The correct answer is c; this is the correct definition of risk appetite and risk tolerance.
Reading reference: John Fraser and Betty Simkins, Enterprise Risk Management: Todays Leading Research
and Best Practices for Tomorrows Executives, Chapter 16, pages 287-289.
30. A credit risk analyst notices that data is missing from the following credit report:
Bond Name Koryo Energy
Exposure ?
Recovery rate 27%
Loss given default USD 4,506,700
Expected loss USD 3,372,800
What is the original exposure on the Koryo Energy bond position?
a. USD 4,620,270
b. USD 6,173,500
c. USD 12,491,800
d. USD 16,691,500
Correct answer: b
Explanation: The correct answer is b. Since Loss Given Default = Exposure * (1-recovery rate), then the exposure
is equal to the LGD divided by (1-recovery rate). Therefore the original exposure on the position is 4,506,700 /
(1-0.27) or approximately USD 6,173,500.
Reading reference: Allan Malz. Financial Risk Management, Models, History and Institutions, Chapter 6, pages
201 203.
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About GARP | The Global Association of Risk Professionals (GARP) is a not-for-prot global membership organization dedicated to
preparing professionals and organizations to make better informed risk decisions. Membership represents over 150,000 risk manage-
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