  All-optical feedback can be effected by putting the output of a source cavity
through a Faraday isolator and into a second cavity which is coupled to the
source cavity by a nonlinear crystal. If the driven cavity is heavily damped,
then it can be adiabatically eliminated and a master equation or quantum
Langevin equation derived for the first cavity alone. This is done for an input
bath in an arbitrary state, and for an arbitrary nonlinear coupling. If the
intercavity coupling involves only the intensity (or one quadrature) of the
driven cavity, then the effect on the source cavity is identical to that which
can be obtained from electro-optical feedback using direct (or homodyne)
detection. If the coupling involves both quadratures, this equivalence no
longer holds, and a coupling linear in the source amplitude can produce a
nonclassical state in the source cavity. The analogous electro-optic scheme
using heterodyne detection introduces extra noise which prevents the production
of nonclassical light. Unlike the electro-optic case, the all-optical feedback
loop has an output beam (reflected from the second cavity). We show that this
may be squeezed, even if the source cavity remains in a classical state.
