Answer: Use short-term repurchase agreements, or commercial paper for financing long-term assets.

## Explanation During the 2007-2008 credit crisis, the asset-liability mismatch phenomenon involved financial institutions using **short-term financing** (such as repurchase agreements and commercial paper) to fund **long-term assets** (like mortgage-backed securities and other structured products). - **Option A** is incorrect because it describes the opposite scenario - short-term assets with short-term financing, which doesn't create a mismatch. - **Option B** is incorrect because it suggests using long-term financing for long-term assets, which is actually proper asset-liability management. - **Option C** is correct as it accurately describes the core problem: using short-term funding sources to finance long-term, illiquid assets. - **Option D** is incorrect because asset-liability maturity mismatch inherently creates funding liquidity risk, especially when short-term funding sources dry up. This mismatch became critical when short-term funding markets froze, forcing institutions to sell long-term assets at distressed prices, amplifying the crisis.

Author: LeetQuiz Editorial Team