When properly used and interpreted, both procedures are important and useful measures of interest rate risk. If there is a structural imbalance in the financial statement that could result in major income problems in the event of a change in interest rates, this problem can be detected by an NEV analysis. In this way, the procedure provides an early warning of potential income problems. One of the difficulties with this approach is the manner in which non-maturity deposits (NMDs) are valued and the interpretation of the results. It is not always clear where a “good” NEV ends and a “bad” one starts. However, a multi-period income simulation using different rate shocks is a more direct test of interest rate effects. When this approach is used it is essential that the income effects be evaluated over an extended period such as three to five years in order to determine both the extent of any adverse effects and the income recovery period. Usually, both approaches will provide results that are consistent in that they send the same signal or early warning of potential problems. It is important to bear in mind that NEV and income simulation are closely related. In fact, the NEV results are derived directly from the multi-period cash flows, which include interest income and expenses