Meaning of Fungible

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

Meaning of Fungible

Postby AMITAG1990 » Thu Nov 01, 2012 7:37 pm

Please tell me,

What is mean by fungible.?? Actually in book it is given, I-strip is a fungible and p-strip is not.?? What is its mean.??

And also tell me what is difference between exercise price and strike price.?? it is given in book to insure portfolio synthetically we need to have different strike price and exercise price..

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content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Meaning of Fungible

Postby content.pristine » Fri Nov 02, 2012 5:36 pm

Hi Amit,

This is a very good question.
Thanks for posting it! 8-)

First of all, I'll explain Fungible with an example.
Lets say you borrowed Rs 10,000 from me. I paid you with 10, Rs1,000 bills.
However, even if you pay me back Rs 10,000 in the form of 20* Rs 500 bills, I would not mind. :)
Hence, currency is fungible. Commodities with the same quality are fungible.
However, if you borrow my bose stereo system and returned a sony, I would get very angry! :x
Stereo systems are not fungible :lol:

Now, consider these P STRIPS and I STRIPS of 2 T. Bonds that are identical. All identical I-strips of the same maturity would have the same CUSIP even if they come from different bonds. CUSIPs are nothing but security codes. Hence I STRIPS are fungible. However, the CUSIPs of P-STRIPS are unique to the bond. They are not fungible.

Hope this helps!
8-)

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

Re: Meaning of Fungible

Postby AMITAG1990 » Fri Nov 02, 2012 6:56 pm

hello,
thanx for explanation, but you didnt replied the answer of my another question, i.e difference between strike price and excercise price ??

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Meaning of Fungible

Postby content.pristine » Fri Nov 02, 2012 8:13 pm

They are the same.
Give me more context, or the source so I can help you figure out what they mean.

8-)


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