[emilioolivares]

#1 I don't think there is a perfect measure. In practice portfolio managers use multiple views of risk, including multi-factor risk models, stress testing, value at risk, etc. Any tool money can buy they will use.

#2 has already been solved: One formulation is here: https://stanford.edu/~boyd/papers/pdf/dyn_port_opt.pdf There are optimizers out there already on the market with these capabilities.

[ericjang]

#1 - Whether or not there is a formal risk measure that is less "ad-hoc/in-practice" than the others is still up in the air, no?