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We present a quantum theory of nondegenerate phase-sensitive parametric amplification in a chi^3 nonlinear medium. The non-zero response time of the Kerr chi^3 nonlinearity determines the quantum-limited noise figure of chi^3 parametric amplification, as well as the limit on quadrature squeezing. This non-zero response time of the nonlinearity requires coupling of the parametric process to a molecular-vibration phonon bath, causing the addition of excess noise through spontaneous Raman scattering. We present analytical expressions for the quantum-limited noise figure of frequency non-degenerate and frequency degenerate chi^3 parametric amplifiers operated as phase-sensitive amplifiers. We also present results for frequency non-degenerate quadrature squeezing. We show that our non-degenerate squeezing theory agrees with the degenerate squeezing theory of Boivin and Shapiro as degeneracy is approached. We have also included the effect of linear loss on the phase-sensitive process., Comment: Now final submitted version. Added references, added some content, edited language

Through scanned coincidence counting, we probe the quantum image produced by parametric down conversion with a pump beam carrying orbital angular momentum. Nonlocal spatial correlations are manifested through splitting of the coincidence spot into two., Comment: 4 pages, 6 figures. Submitted to Physical Review Letters