Is your water level data a set of points? If so, you can use the interpolation tools in ArcGIS. Take a look at https://pro.arcgis.com/en/pro-app/latest/tool-reference/spatial-analyst/an-overview-of-the-interpolation-tools.htm
The natural neighbours is the interpolator I would use to do the interpolation. It is a linear fit of all of the data points, similar to a TIN and honours the data points.
To create a Digital Terrain Model (DTM) from water level data using ArcGIS software, you can follow these steps:
The first step is to import the water level data into ArcGIS. You can do this by using the "Add Data" button on the ArcGIS toolbar or by dragging and dropping the data file into the ArcMap window.
Create a raster surface from the water level data, you can use the Interpolation "Inverse Distance Weighted (IDW)" interpolation tool in the ArcGIS Spatial Analyst toolbox.
Once you have created the raster surface, you can convert it to a TIN using the "Raster to TIN" tool in the 3D Analyst toolbox, From TIN, Raster to TIN. This tool creates a TIN from the input raster surface, which can be used to create a DTM.
Finally, you can create a DTM by using the "TIN to Raster" tool in the 3D Analyst toolbox. This tool converts the TIN to a raster surface, which represents the terrain elevation values at each cell location.