I heard this word a couple of days back and I was wondering what it is. So, I finally googled for it. It means “interchangeable”.
Definition in Finance:
Interchangeable. The term is often used to apply to financial instruments which are identical in specifications. For example, options and futures contracts are highly fungible, since they are highly standardized arrangements. On the other hand, forwards and swaps are not, since they are customized arrangements. Instruments that are highly fungible tend to be very liquid, and so transaction costs tend to be low.
Definition in the Oil Industry:
Literally means “interchangeable in trade.” Commonly used to denote products which are suitable for transmission by pipeline. Ethanol is not considered fungible in this sense, in that it would absorb any water accumulating in pockets in a pipeline.
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