Black Scholes, Stochastic Process, Options Trading, Financial Modelling, Differential Equations.
decide to exercise your right to buy the stock. The second part, K*e(-rt)*N(d2) is what you have to pay to receive that option. Thus the exercise price, i.e. K is multiplied by the discounting factor e(-rt) as this is the amount which we could have invested in a riskless asset instead of buying the