Presenting at the SIAM Conference on Financial Mathematics and Engineering (FM25)

SIAM FM25 - Miami, FL

Between July 15 and 18, 2025, I attended the 2025 SIAM Conference on Financial Mathematics and Engineering (FM25), held at the Hyatt Regency Miami, in Miami, Florida. On Wednesday, July 16, I presented our paper

A Bayesian Approach to Generate Distribution-based Signals in Pairs Trading Allan Quadros (Kansas State University / University of North Florida), Michael Higgins (Kansas State University) and Brian Silverstein (University of South Carolina)

in contributed session CP5 of the conference.

The talk

We introduce a novel approach to improving the precision and adaptability of trading signals in pairs trading. Our method derives the full conditional distribution of the hedge ratio and utilizes its quantiles as confirmation thresholds for trading signals generated within the standard cointegration framework. We apply this approach to selected asset pairs across the U.S. and Brazilian markets, demonstrating its effectiveness through empirical analysis. Our findings indicate that the proposed Bayesian hierarchical model significantly enhances trading performance and risk management compared to traditional cointegration-based strategies. By adopting a distribution-based framework, our approach not only enables more timely and adaptive trading signals but also improves pair selection by effectively filtering out false positives in cointegration tests, as demonstrated through simulations.

The paper has since been accepted and published in Quantitative Finance (see this post).

Left: one of the contributed sessions. Right: a talk on the 4/2 Heston-Nandi GARCH model, one of many interesting presentations.

About the conference

FM25 is the flagship meeting of the SIAM Activity Group on Financial Mathematics and Engineering. It gathers mathematicians, statisticians, economists and practitioners working on state-of-the-art mathematical and computational tools in quantitative finance, from stochastic control and optimal execution to machine learning, market microstructure and risk management. It was a great opportunity to get feedback on our work from people who think about trading problems from a very different angle than statisticians usually do.

About Miami

The conference took place at the Hyatt Regency Miami, in downtown Miami, right on the bank of the Miami River and a few steps from Biscayne Bay. The city is a natural home for a finance meeting: the Brickell district, right across the river from the conference hotel, has become one of the largest financial hubs in the United States, with a strong Latin American flavor. In July, however, the main attraction is the weather: hot, humid, with afternoon storms that come and go in minutes, and plenty of water views to compensate.

The Miami River seen from the Hyatt Regency Miami, the conference hotel.

• Venue: Hyatt Regency Miami
• Conference website: SIAM FM25
• Program and abstracts (PDF): FM25 Abstracts