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There are 4-5 external solenoids that tell the tranny when to shift. These are replaceable. I would suggest going to the dealer and giving him some hard earned cash. His scanner will pinpoint exactly which solenoid it is and if there is other damage.
Driving this way will soon destroy the torque converter. The flashing arrow means that you are in 3rd gear all of the time, limp home mode.
Let's hope that it is simple and not a tranny transplant.
Klaus
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Proud owner of a 220S. If I had more room, I would have more Volvos.
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