Negative correlation, long asset and short liability

[johntavv]

How is being long an asset and simultaneously being short a liability considered an offsetting position?

 

[Galli]

Are you actually short a liability or are you long a liability?
If you’re long a treasury 30-year 8% bond and have a liability in the form of a 30-year 8% annuity due on the same day, then you have completly offsetting positions.
The cashflow from the treasury would pay the cashoutflow from the annuity you underwrote