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7. What are two ways a DI can offset the effects of asset-side liquidity risk such...

7. What are two ways a DI can offset the effects of asset-side liquidity risk such as the drawing down of a loan commitment?
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Depository institutions(DI) are the financial institutions(FI) most exposed to liquidity risk.The liquidity risk at depository instituitions(DI) are Liability-side liquidity risk,Asset side liquidity risk, Measuring a DI's Liquidity exposure,Unepected deposit drains and Bank runs etc.

The effects of asset-side liquidity risk such as the drawing doown of a loan commitment can offset by use either liabality management or reverse adjustment strategies. Liability management involve borrowing funds in the money market or purchased funds market. Reserve adjustments involve selling cash-type assets like treasury bills or simply reducing excess cash reserves at the point of minimum level which meet the required amount. But, the minimum level must meet the regulatory imposed reserve requirements.

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