Density functional theory based calculations revealed that optical properties of AA-stacked bilayer graphene are anisotropic and highly sensitive to the interlayer separation. In the long wave length limit of electromagnetic radiation, the frequency dependent response of complex dielectric function becomes vanishingly small beyond the optical frequency of 25.0 eV. Besides, static dielectric constant shows a saturation behaviour for parallel polarization of electric field vector when interlayer spacing is greater than 2.75 angstrom. As a consequence, an appropriate modification of effective fine structure constant is observed as a function of layer separation. Moreover, the bilayer systems are highly transparent in the optical frequency range of 7.0-10.0 eV. The electron energy loss function exhibits two different in-plane collective (plasmon) excitations and a single out of plane plasmon excitation. The spectral nature of different frequency dependent optical properties is observed to be very similar to that of the monolayer pristine graphene apart from their exact numerical values. (C) 2015 Elsevier B.V. All rights reserved.