How many terms are in Black–Scholes equation contained

Question

How many terms are in Black–Scholes equation contained?

Answer 1

The equation contains four terms:

• ∂V/∂t = time decay, it how much the option value changes by when the stock price does not change
• ½ σ²S²(∂²V/∂S²) = convexity term, that is, how much a hedged position makes upon average by stock moves
• rS(∂V/∂S) = drift term allowing for the growth in the stock at the risk-free rate and
• -rV = the discounting term, because the payoff is received on expiration, if you are valuing the option now.