Source: https://guthlabs.ai/docs/instruments/exchange-rate-pass-through-pip-value-calculator/mechanism/

instrument mechanism / verified-clean

# Exchange Rate Pass-Through / Pip Value Calculator mechanism

The inspectable method record for Exchange Rate Pass-Through / Pip Value Calculator, kept separate from implementation and qualification.

Status: **VERIFIED_CLEAN**Lifecycle: **verified-clean**

## Model scope

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.

- 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.

## Units and conventions

- 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.

## Inspectable vector

One of 4 source-bound review vectors:

````
{
  "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"
}
````

## Failure boundary

**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.

## Other records

[01**Overview**](<https://guthlabs.ai/docs/instruments/exchange-rate-pass-through-pip-value-calculator/>)[03**Implementation**](<https://guthlabs.ai/docs/instruments/exchange-rate-pass-through-pip-value-calculator/implementation/>)[04**Qualification**](<https://guthlabs.ai/docs/instruments/exchange-rate-pass-through-pip-value-calculator/qualification/>)

## Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

- `VERIFIED_LEDGER.json`

- `evidence-tranche5/tranche5-results.json`

- `BOUNDARY_HAZARD_CATALOG.json`