Asset pricing can be understood in two ways: absolute pricing and relative pricing. Absolute pricing looks at prices based on economic factors and preferences, while relative pricing compares prices of different assets. The chapter uses coin tossing games to explain how utility functions can help determine prices. It discusses key pricing concepts like arbitrage, the law of one price, and model completeness. The chapter also covers basic math terms and theorems in asset pricing models. It explores methods for comparing pricing and hedging strategies.