The course covers main tools in stochastic calculus and their applications, as well as main theoretical concepts and some empirical results in asset pricing. The emphasis is on the underlying intuition; this is not a math or statistics course. The goal of the course is to help students acquire a framework for understanding and following the large literature in derivatives and asset pricing and for producing their own research. The course also prepares the students for a more exhaustive study of empirical asset pricing in a subsequent doctoral seminar. Towards the end of the semester, extra attention is placed on the ICAPM, as it may not receive detailed treatment in other courses.