A rapid increase in short-term foreign debts due to sustained arbitrageopportunities is an important cause to induce the instability of foreign andfinancial markets in Korea in the face of the 2008 global financial crisis. As forsustained arbitrage incentives, the focus of this paper is on repeated externalshocks to won/dollar spot exchange rates in the situation where it is difficultto compete away profits from arbitrage due to various frictions in thetransactions for arbitrage. According to the empirical investigation based onboth daily time series data from January 2003 to August 2008 and monthly timeseries data from January 2000 to August 2008, it turns out that the sale ofdomestic stocks by foreign investors which had been sustained since the 2ndquarter of 2006 is a significant factor to explain the increase in won/dollarexchange rate and consequent arbitrage opportunity, and that the arbitrageopportunity resulting from the sales of domestic stocks by foreign investors isa significant factor to explain the rapid increase in short-term borrowing from abroad.