I work with practical, day-to-day trading: just making money. One of my small clients recently hired a smart, new MFE. We discussed potential trading strategies for a long time. Finally, he expressed surprise that I never mentioned (much less used) stochastic calculus, which he spent many long hours studying in his MFE program. I use the products of stochastic calculus (e.g., the Black-Scholes equation) but not the calculus itself.
Now I am wondering, does stochastic calculus play a role in day-to-day trading strategies? Am I under-utilizing a potentially valuable tool?
If this client was a Wall Street investment bank that was making markets in complicated derivatives, I'm sure their research department would use stochastic calculus for modeling. But they're not, so I'm not sure how we would use stochastic calculus.
(Full disclosure: I have Masters degrees but not a PhD. I'm an applied mathematician, not a theoretician.)