Normal-incidence reflectance and transmittance measurements were made on thin vacuum-evaporated films of five silver-palladium alloys, approximately 1000 Å thick, containing from 0 to 15 at.% palladium. In addition, the fractional change in reflectance with strain was measured for films of four Ag-Pd alloys having Pd concentrations from 0 to 4 at.%. The data yielded the dielectric constant ε̃ and the change in the dielectric constant with strain from 1.8 to 4.6 eV. The peak in the loss function, — Im (1ε̃), near 3.8 eV decreases and broadens rapidly with alloying. An overlap between the loss-function peak and an absorption band due to transitions from resonant bound states on the Pd sites indicates that excitation of quasilocalized electrons is an important mechanism for the damping of plasma oscillations in the alloys. The 3.87-eV absorption edge in pure silver broadens with alloying, but does not shift noticeably. With the aid of the piezoreflectance data, the energy of the two transitions, L3→(Fermisurface) and L2′→L1, contributing to this edge have been located. The former begins at approximately 3.88 eV for silver and the edge for the latter, corresponding to the energy difference between the Fermi energy and a state in the second conduction band passing through L1, occurs at 3.98 eV. The energy difference between L1 and L2 was determined to be 4.25 eV in silver. Errors in the Kramers-Kronig transform of the piezoreflectance spectrum are shown to introduce fine structure in the spectrum of the strain derivative of the dielectric constant.