Spike timing-dependent plasticity induces non-trivial topology in the brain.

We study the capacity of Hodgkin-Huxley neuron in a network to change temporarily or permanently their connections and behavior, the so called spike timing-dependent plasticity (STDP), as a function of their synchronous behavior. We consider STDP of excitatory and inhibitory synapses driven by Hebbian rules. We show that the final state of networks evolved by a STDP depend on the initial network configuration. Specifically, an initial all-to-all topology evolves to a complex topology. Moreover, external perturbations can induce co-existence of clusters, those whose neurons are synchronous and those whose neurons are desynchronous. This work reveals that STDP based on Hebbian rules leads to a change in the direction of the synapses between high and low frequency neurons, and therefore, Hebbian learning can be explained in terms of preferential attachment between these two diverse communities of neurons, those with low-frequency spiking neurons, and those with higher-frequency spiking neurons

Diverse Beliefs and Time Variability of Risk Premia

Why do risk premia vary over time? We examine this problem theoretically and empirically by studying the effect of market belief on risk premia. Individual belief is taken as a fundamental primitive state variable. Market belief is observable; it is central to the empirical evaluation and we show how to measure it. Our asset pricing model is familiar from the noisy REE literature but we adapt it to an economy with diverse beliefs. We derive equilibrium asset prices and implied risk premium. Our approach permits a closed form solution of prices; hence we trace the exact effect of market belief on the time variability of asset prices and risk premia. We test empirically the theoretical conclusions. Our main result is that, above the effect of business cycles on risk premia, fluctuations in market belief have significant independent effect on the time variability of risk premia. We study the premia on long positions in Federal Funds Futures, 3- and 6-month Treasury Bills (T-Bills). The annual mean risk premium on holding such assets for 1-12 months is about 40-60 basis points and we find that, on average, the component of market belief in the risk premium exceeds 50% of the mean. Since time variability of market belief is large, this component frequently exceeds 50% of the mean premium. This component is larger the shorter is the holding period of an asset and it dominates the premium for very short holding returns of less than 2 months. As to the structure of the premium we show that when the market holds abnormally favorable belief about the future payoff of an asset the market views the long position as less risky hence the risk premium on that asset declines. More generally, periods of market optimism (i.e. "bull" markets) are shown to be periods when the market risk premium is low while in periods of pessimism (i.e. "bear" markets) the market's risk premium is high. Fluctuations in risk premia are thus inversely related to the degree of market optimism about future prospects of asset payoffs. This effect is strong and economically very significant

Testing the stability of implied probability density functions

SIGLEAvailable from British Library Document Supply Centre-DSC:9350.8308(no 114) / BLDSC - British Library Document Supply CentreGBUnited Kingdo