I'm trying to understand how in Chawla's paper that I've linked below, how he obtains equation (2.5) for the zero coupon bond pricing equation?
The equation is:
$\frac{\partial B}{\partial t} + \frac{1}{2} (\alpha r - \beta) \frac{\partial^{2} B}{\partial r^{2}} + (\eta - \gamma r) \frac{\partial B}{\partial r} - rB = 0 $
Where the bond price is:
$B(t;T) = B(T;T) e^{- \int_{t}^{T} r(s) ds} $
I assume hes using the Ito Lemma to get this, but how is he applying this?
The equation also looks like the Black-Scholes equation, is there any link there?