Asset Pricing Models are mathematical frameworks used to determine the expected return on an investment based on its risk. These models help investors understand how different factors, such as market conditions and individual asset characteristics, influence prices. Common models include the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). These models are essential for portfolio management and investment strategies, as they provide insights into how to allocate resources effectively. By analyzing risk and return, investors can make informed decisions about which assets to buy or sell, ultimately aiming to maximize their financial returns while managing potential risks.