It's getting to be a very common malady that I'm now seeing alot of within the last year on 850s, X70s.
You must now replace that caliper and possibly the rotor and pads too if the rotor got so hot as to warp and I've also seen that occur many times as well.
I can't explain yet why this is now happening as it wasn't THAT common on older Volvos.
Although you can probably get away with replacing just the one caliper now, you might want to consider replacing the other sides caliper as it could be next. At least remove it and take a look at its outer dust seal as if that's popping out, chances are that corrosion's building up and it also won't last much longer.
Reman OEM calipers from the dealer will run about $160 (plus core charge).