NEW YORK (Reuters) - Some credit traders are betting that MBIA Inc will default over the next year, but the company's chief executive said anyone believing the world's largest bond insurer is close to missing a payment on its own debt is wrong.

The cost of protecting MBIA debt against default for a year in the credit derivatives market has surged, though some spreads have declined since January as MBIA has raised more than $2.6 billion of capital and preserved the top ratings at its main insurance unit.

MBIA has just $80 million of interest payments due over the next year, and no scheduled principal repayments, compared with at least $500 million in cash to cover that obligation, chief executive Jay Brown said in a March 9 letter to shareholders.

The company has even more funds available considering lines of credit and other items, Brown wrote.

"I think even our most vocal critics will agree that $500 million-plus of cash should be enough to pay $80 million in holding company financial payments," Brown wrote.

MBIA does not have any principal payments pending on debt until 2010, when it has a $100 million obligation coming due, Brown wrote.

In fact, buying credit protection for one year costs much more per year than buying five-year protection, Brown wrote.

"Given our robust financial position at MBIA Inc, I would certainly argue that the existing spread in the short-term is illogical," Brown wrote.