The optical response functions and band structures of LiCoO<sub>2</sub> are studied at different levels of approximation, from density functional theory (DFT) in the generalized gradient approximation (GGA) to quasiparticle self-consistent QSGW (with G for Green's function and W for screened Coulomb interaction) without and with ladder diagrams ($QSG\\hat{W}$) and the Bethe Salpeter Equation (BSE) approach. The QSGW method is found to strongly overestimate the band gap and electron-hole or excitonic effects are found to be important. They lower the quasiparticle gap by only about 11~\\% but the lowest energy peaks in absorption are found to be excitonic in nature. The contributions from different band to band transitions and the relation of excitons to band-to-band transitions are analyzed. Finally, the excitons are found to be strongly localized. Finally, a comparison to experimental data is presented.