Value added and residual risk and active risk

CFA Level II Portfolio Management
#1

  1. Value Added= alpha-(risk aversion*residual risk^2)… why are we squaring residual risk?

  2. Alpha= IR*residua risk & w* = IR/(2*risk aversion), where w* = Optimal Level of residual risk. Now in page 225 Schweser, w- residual risk- has been substituted for w*-optimal level of residual risk_. How is it possible that residual risk has been substituted for_ an optimal level of residual risk?

I mean w=alpha/IR whereas w*=IR/(2* risk aversion)???