We develop a unified valuation theory that incorporates credit risk (defaults), collateralization and funding costs, by expanding the replication approach to a generality that has not yet been studied previously and reaching valuation when replication is not assumed. This unifying theoretical...

Forward start options are examined in Heston's (Review of Financial Studies,Vol. 6, pp. 327–343, 1993) stochastic volatility model with the CIR (Econometrica, Vol. 53, pp. 385–408, 1985) stochastic interest rates. The instantaneous volatility and the instantaneous short rate are assumed to...