Abbot, citing examples such as Enron and September 11, said the investment industry has experienced "one catastrophic event after another" in the past couple of years and this has increased volatility across financial markets.
"Events that were considered catastophic only a few years ago have become quite ordinary," said Abbott. "We've seen interest rates moving by 40-60 basis points in a week; implied volatility in the market being way out of line with the historical," he added.
Abbott argued that risk managers, as well as focusing on traditional risk management goals, such as delta hedging, also need to focus on larger movements and catastrophic events.
"We need to think about the perspective of how we've looked at risk," said Abbott. "I think we're going to continue to see persistent volatility for several years until we reach a new equilibrium point."