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Fungible Commodity


A commodity that is currently, or may in the future become, an underlying of recurrent/ tradable contracts in the spot markets, forward markets or derivatives markets. The units of a fungible commodity are interchangeably or easily replaceable in the market. A prime example is oil, which is a fungible commodity, that is, oil of different grades and origins is interchangeable. Other examples of fungible commodity include wheat, gold and silver.

Fungibility of a commodity depends on several factors including availability in a specific grade or condition (specifications), location (in a very close vicinity), cost/ price, etc.



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