Reference no: EM132674578

Countries around the world historically used the Gold standardBretton Woods Systemclean floatdirty float (1890-1914), which, however, was changed to fixed exchange rate system through Bretton Woods since the WWII. The collapsed and most countries around the world today use either a or as an exchange rate system. While removing FX controls and increasing economic integration enable investors to roam around the world, this also means that investors and countries face diverse challenges, risks and uncertainties, which they have to manage through different tools (e.g., measuring country risk and using debt management strategies such as Paris and London Club, debt-for-debt swap and debt-for-equity swap). Generating profits from investments is becoming increasingly challenging even from international diversification. Hence, some investors prefer to tilt towards their home assets (home bias). Highlight the key differences between the following terms:

• Gold standard vs Bretton Woods
• Clean float vs dirty float
• Paris vs London Club
• International diversification vs home bias