During stressed market conditions, how may parameter values change?

During stressed market conditions, parameter values may apply differently due to heightened volatility, increased trading activity, or changes in market behavior. In a stressed environment, factors such as liquidity, risk perception, and price correlations can shift, leading to a re-evaluation of how certain parameters are interpreted or utilized. This means that standard parameters used for risk management or trading strategies may not be as effective or may operate under different assumptions, necessitating adjustments to how they are applied.

Market participants often need to recalibrate their models or strategies in response to the unique challenges presented by stressed conditions, which can involve altering how certain input parameters are employed in decision-making processes. This adaptability is crucial for navigating periods of market uncertainty and ensuring appropriate responses to changing dynamics.