This paper deals with bilevel optimization problem in which we want to minimize transaction costs which are proportional and we want to have our portfolio mean-risk efficient. As a measure of risk we consider Conditional Value-at-Risk. The bilevel optimization problem is presented, reformulations of the problem according to the probability distribution are described as well.
The goal of the paper is to present reduction of bilevel optimization problem to a single level optimization problem and to show equivalence between these two types of reduction.