DEFINITION of 'Algorithm'

A set of rules for accomplishing a task in a certain number of steps. One common example is a recipe, which is an algorithm for preparing a meal. Algorithms are essential for computers to process information. As such, they have become central to our daily lives, whether ordering a book online, making an airline reservation or using a search engine.


Algorithms are now used throughout the financial world in areas like loan pricing, stock trading and asset-liability management. For example, algorithmic trading, known as "algo," is used for deciding the timing, pricing and quantity of stock orders.

  1. Data Smoothing

    The use of an algorithm to remove noise from a data set, allowing ...
  2. Program Trading

    Computerized trading used primarily by institutional investors ...
  3. Neural Network

    A series of algorithms that attempt to identify underlying relationships ...
  4. Algorithmic Trading

    A trading system that utilizes very advanced mathematical models ...
  5. Fuzzy Logic

    A mathematical logic that attempts to solve problems by assigning ...
  6. Cash

    Legal tender or coins that can be used to exchange goods, debt ...
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