Dealing with complex transaction costs in portfolio management

Patrizia Beraldi, Antonio Violi*, Massimiliano Ferrara, Claudio Ciancio, Bruno Antonio Pansera

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


This paper deals with the problem of modelling complex transaction cost structures within portfolio management models in an efficient and effective way. We consider a general structure of transaction costs, where the applied commissions depend on the range of traded monetary amount and we use this general structure within a portfolio optimization problem with rebalancing decisions in response to new market conditions. The presence of transaction costs reduces the fund’s capital and should be properly accounted for to avoid substantial costs that impact on portfolio performance. In this paper we present a mixed integer model equipped with a specialized Branch and Bound method that exploits the specific formulation of the trading operations. Computational experiments, carried out on transaction cost structures offered by real-life traders, have shown the effectiveness of the proposed model and the computational efficiency of the solution approach.

Original languageEnglish
Pages (from-to)7-22
Number of pages16
JournalAnnals of Operations Research
Issue number1-2
Early online date8 Apr 2019
Publication statusPublished - Apr 2021

Bibliographical note

Publisher Copyright:
© 2019, Springer Science+Business Media, LLC, part of Springer Nature.

Copyright 2021 Elsevier B.V., All rights reserved.


  • Branch and bound method
  • Complex transaction costs
  • Portfolio management


Dive into the research topics of 'Dealing with complex transaction costs in portfolio management'. Together they form a unique fingerprint.

Cite this