10 It has been observed empirically that implied volatilities of stocks are ard biased estimates of future volatility. Given that there is not really a constant risk-free rate, implied volatilities should be interpreted as implied forward-price volatilities, whereas the empirical literature has measured "f- ture volatility" as the subsequent volatility of the stock. What assumptions about bond volatilities and the correlation of bonds and stocks could explain the empirical finding; ie, what assumptions imply that the volatility of the forward price exceeds the volatility of the stock? 10 It has been observed empirically that implied volatilities of stocks are ard biased estimates of future volatility. Given that there is not really a constant risk-free rate, implied volatilities should be interpreted as implied forward-price volatilities, whereas the empirical literature has measured "f- ture volatility" as the subsequent volatility of the stock. What assumptions about bond volatilities and the correlation of bonds and stocks could explain the empirical finding; ie, what assumptions imply that the volatility of the forward price exceeds the volatility of the stock