The Gravity Recovery and Climate Experiment (GRACE) has been successfully used to monitor variations in terrestrial water storage (GRACE_TWS) and groundwater storage (GRACE_GWS) across the globe, yet such applications are hindered on local scales by the limited spatial resolution of GRACE data. Using the Lower Peninsula of Michigan as a test site, we developed optimum procedures to downscale GRACE Release-06 monthly mascon solutions. A four-fold exercise was conducted. Cluster analysis was performed to identify the optimum number and distribution of clusters (areas) of contiguous pixels of similar geophysical signals (GRACE_TWS time series); three clusters were identified (cluster 1: 13,700 km²; cluster 2: 59,200 km²; cluster 3: 33,100 km²; Step I). Variables (total precipitation, normalized difference vegetation index (NDVI), snow cover, streamflow, Lake Michigan level, Lake Huron level, land surface temperature, soil moisture, air temperature, and evapotranspiration (ET)), which could potentially contribute to, or correlate with, GRACE_TWS over the test site were identified, and the dataset was randomly partitioned into training (80%) and testing (20%) datasets (Step II). Multivariate regression, artificial neural network, and extreme gradient boosting techniques were applied on the training dataset for each of the identified clusters to extract relationships between the identified hydro-climatic variables and GRACE_TWS solutions on a coarser scale (13,700–33,100 km²), and were used to estimate GRACE_TWS at a spatial resolution matching that of the fine-scale (0.125° × 0.125° or 120 km²) inputs. The statistical models were evaluated by comparing the observed and modeled GRACE_TWS values using the R-squared, the Nash–Sutcliffe model efficiency coefficient (NSE), and the normalized root-mean-square error (NRMSE; Step III). Lastly, temporal variations in GRACE_GWS were extracted using outputs of land surface models and those of the optimum downscaling methodology (downscaled GRACE_TWS) (Step IV). Findings demonstrate that (1) consideration should be given to the cluster-based extreme gradient boosting technique in downscaling GRACE_TWS for local applications given their apparent enhanced performance (average value: R-squared: 0.86; NRMSE 0.37; NSE 0.86) over the multivariate regression (R-squared: 0.74; NRMSE 0.56; NSE 0.64) and artificial neural network (R-squared: 0.76; NRMSE 0.5; NSE 0.37) methods; and (2) identifying local hydrologic variables and the optimum downscaling approach for individual clusters is critical to implementing this method. The adopted method could potentially be used for groundwater management purposes on local scales in the study area and in similar settings elsewhere.

In a one price economy, the Fundamental Theorem of Asset Pricing (FTAP) establishes that no-arbitrage is equivalent to the existence of an equivalent martingale measure. Such an equivalent measure can be derived as the normal unit vector of the hyperplane that separates the attainable gain subspace and the convex cone representing arbitrage opportunities. However, in two-price financial models (where there is a bid–ask price spread), the set of attainable gains is not a subspace anymore. We use convex optimization, and the conic property of this region to characterize the “no-arbitrage” principle in financial models with the bid–ask price spread present. This characterization will lead us to the generation of a set of price factor random variables. Under such a set, we can find the lower and upper bounds (supper-hedging and sub-hedging bounds) for the price of any future cash flow. We will show that for any given cash flow, for which the price is outside the above range, we can build a trading strategy that provides one with an arbitrage opportunity. We will generalize this structure to any two-price finite-period financial model.

In a one price economy, the Fundamental Theorem of Asset Pricing (FTAP) establishes that no-arbitrage is equivalent to the existence of an equivalent martingale measure. Such an equivalent measure can be derived as the normal unit vector of the hyperplane that separates the attainable gain subspace and the convex cone representing arbitrage opportunities. However, in two-price financial models (where there is a bid-ask price spread), the set of attainable gains is not a subspace anymore. We use convex optimization, and the conic property of this region to characterize the “No-Arbitrage” principle in financial models with the bid-ask price spread present. This characterization will lead us to the generation of a set of price factor random variables. Under such a set, we can find the lower and upper bounds (supper-hedging and sub-hedging bounds) for the price of any future cash flow. We will show that for any given cash flow, for which the price is outside the above range, we can build a trading strategy that provides one with an arbitrage opportunity. We will generalize this structure to any two-price finite-period financial model.