We specialize the quantum-statistical theory of optical bistability developed in "Optical Bistability. II" to a low-
Q cavity. From a linearized Fokker-Planck equation derived in the positive
P representation, the steady-state correlation matrix and spectrum of fluctuations are calculated. Expressions which normally assume a positive-definite diffusion matrix are shown to be valid for nonpositive-definite diffusion. For absorptive bistability we find agreement with results derived previously by quite different methods. More generally we extend previously published results by including atomic and cavity detunings. We compare the transmitted spectrum for dispersive bistability with that for absorptive bistability, and photon antibunching in dispersive bistability is discussed.