Template:M summ 2002 ISDA Unpaid Amounts

If you think of an ISDA Transaction as comprising offsetting payment streams, these payments fall into one of three ontological categories:

Been and gone: Those that are already paid: settled, gone, checked into the hereafter; on permanent location in that foreign country we call the past — we care less about these; they are but a fossil record: they pose no risk, attract no capital and excite no prospects of revenue or compensation.
Yet to come: Due to be paid, or delivered, at a specified date in the future. Perhaps fixed; perhaps yet to be determined, but conceptually still out there. It is, conventionally, by off setting the provisional present value of these future cashflows, that we value “the Transaction” — this is what we call its “replacement cost”.
That weird inter-regnum of payments whose due date has passed, and which should have have been paid, and thus emigrated permanently to that foreign country but, for whatever reason — inattention, inability, defiance, or the affordances of Section 2(a)(iii) — they have not yet been made, so they need to be worried about, accounted for and factored into things, over and above the “replacement” value of the trade.

Unpaid Amounts are of interest in two cases:

Default — obviously, they a significant possibility where a party is not meetings it obligations as they fall due; and
When taking credit support — because they must be remembered when calculating ones Exposure.