Source: https://guthlabs.ai/docs/instruments/exchange-rate-pass-through-pip-value-calculator/
instrument / verified-clean
# Exchange Rate Pass-Through / Pip Value Calculator
The current ledger marks this instrument verified clean within the source-bound verification corpus.
Status: **VERIFIED_CLEAN**Lifecycle: **verified-clean**
## Inspectable records
[01**Overview**Purpose and lifecycle]()[02**Mechanism**Method and assumptions]()[03**Implementation**Binding and validation]()[04**Qualification**Evidence and errata]()
## Ledger state
The current ledger marks this instrument verified clean within the source-bound verification corpus.
**Area**: Finance, Economics & Business (educational only — never individualized investment, tax, or legal advice)
**Tranche**: tranche-5
**Evidence ID**: t5-200
**Ledger rows**: 1
No ledger note is attached.
## Review findings
The arithmetic formula is valid only under the explicitly stated account-per-quote exchange-rate interpretation. The current specification does not identify the account currency or define current_rate orientation, so it cannot be verified as a generally correct account-currency pip-value calculator without those constraints and inputs.
### Formula and scope findings
- The formula is only correct when position_size is measured in base-currency units and exchange_rate is expressed as account-currency units per quote-currency unit. The spec does not define that rate orientation.
- If the quote currency is already the account currency, the standard formula is pip_value=pip_size*position_size; dividing by the pair rate is incorrect unless exchange_rate is explicitly 1 quote-currency unit per account-currency unit.
- The account currency is missing from the required inputs, so the claimed output in account currency cannot be determined for arbitrary currency pairs.
- For an account currency different from both pair currencies, the required conversion rate or cross-rate is unspecified.
- The phrase 'quote-currency dependent' is ambiguous and does not state whether current_rate is the currency-pair rate, an account/quote conversion rate, or its inverse.
### Unit assumptions
- position_size is the number of base-currency units, not standard lots or notional account-currency value.
- pip_size is quoted in quote-currency units per one base-currency unit; typical conventions are 0.0001 for most pairs and 0.01 for JPY-quoted pairs.
- exchange_rate must be account-currency units per quote-currency unit for the supplied formula to produce account-currency value.
- The account currency and the rate's currency orientation must be explicitly supplied or derived from a clearly documented conversion pair.
- Rates are positive decimal exchange rates; no spread, commission, leverage, contract-size adjustment, or fractional-pip convention is included.
## Boundary hardening
**BREAK_CLAIMED** · SELF_FLAGGED
A zero exchange rate causes an undefined division and must be rejected. The specification also leaves the pip-size regime for JPY pairs, the sign convention for position size, and conversion from the formula's quote-currency-dependent result into account currency insufficiently specified.
## Errata and corrections
No applied erratum is attached to this unique-name record.
## Inspectable example
4 review vectors are recorded. One source-bound sample is shown below.
````
{
"inputs": {
"currency_pair": "EUR/GBP",
"account_currency": "USD",
"position_size": 100000,
"pip_size": 0.0001,
"current_rate": 1.25,
"current_rate_definition": "USD per GBP"
},
"expected_outputs": {
"pip_value": 8
},
"working": "pip_value=(pip_size/exchange_rate)*position_size\n=(0.0001/1.25)*100000\n=0.00008*100000\n=8 USD per pip"
}
````
## Related workflows
No source-defined multi-instrument workflow membership is recorded.
## Sources and evidence
These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.
- `VERIFIED_LEDGER.json · VERIFIED_CLEAN`
- `evidence-tranche5/tranche5-results.json`
- `BOUNDARY_HAZARD_CATALOG.json`