The discovery of solar-like oscillations in the giant star xy Hya (G7III) was reported by Frandsen et al. (2002). Their frequency analysis was very limited due to alias problems in the data set (caused by single-site observations). The extent to which the aliasing affected their analysis was unclear due to the unknown damping time of the stellar oscillation modes. In this paper we describe a simulator created to generate time series of stochastically excited oscillations, which takes as input an arbitrary window function and includes both white and non-white noise. We also outline a new method to compare a large number of simulated time series with an observed time series to determine the damping time, amplitude, and limited information on the degree of the stochastically excited modes. For xi Hya we find the most likely amplitude to be ~ 2 m/s, in good agreement with theory (Houdek & Gough, 2002), and the most likely damping time to be ~ 2 days, which is much shorter than the theoretical value of 15-20 days calculated by Houdek & Gough (2002). Comment: 24 pages, 12 figures, accepted for publication in SolPhys